Advertisement
Wednesday, 22 January 2020
Agent Resource Center
Agent Resource Center

Investing in Real Estate Isn’t Gambling

Written by Posted On Tuesday, 14 January 2020 04:48

Some investor news have a feeling that they gamble putting money in one asset or another. But, is it just a feeling? Or, is it indeed gambling? Let’s take a look at the difference between the two.

When gambling, you wager on an event with an unpredictable outcome. Buying a $1 lottery ticket or wagering $30 on a roulette comes with no expectation of gain because you can’t influence the results and can only rely on your luck. Your odds of winning in the lottery are ridiculous — 175 million to one. Your odds of winning in roulette are much higher. But there is a casino advantage you should pay from each of your bets.      

When investing, you put money in an asset expecting future returns that will multiply your initial investment. As a rule, the expectation is built upon considerations of the investment climate and numerous other factors. Make your own research, learn the market conditions, look at recent trends and get as much information on the asset as you can to have realistic expectations. The data will help you estimate how much profit you can expect to get and what are possible losses associated with your investment. There is no house advantage and the odds depend on how well you did your homework.

Gambling ≠ investing?

There’s always some gambling, or uncertainty, in any form of investing. It impacts each investor differently. Be it low-risk investing in property or high-risk but rewarding investing in hedge funds or crypto assets, the difference is in the approach. An educated and well-considered decision on investing in real estate isn’t about instinctively buying a house in the hope of profit. Lady Luck may favor you and you will make gains for some time. But if you do it blindly, one day the odds will be against you. So, you risk losing all your previous gains.   

Investors will estimate the odds of the given opportunity and make use of the right moment. They will never put money in high-risk projects unless they are sure that they have an advantage. The gambling part of investing ends where the investor’s education starts.    

Risk & Reward

Before putting money in any asset, the investor has to estimate the potential risks and rewards of a certain investment decision. Not all assets offer the same rewards. Do your due diligence when learning the possible problems and pitfalls, and then decide whether the risk is justified by higher rewards. Expect the unexpected changes and consider the worst-case scenarios in order to be prepared for a nasty surprise. If you determine that a certain investment makes a small profit but the possibility of losing money is high, ignore it. Don’t chase profit, but look for advantageous odds.    

Risks in real estate

Real estate is considered a safe investment. It’s a stable market with low volatility. While investing in property can bring great returns and become a source of steady passive income, there are different risks associated with it. It’s essential to consider these risk factors to evaluate your real estate investment opportunities.

  • General market risk. Any market has upward and downward trends that are related to economic conditions and inflation. The housing market is no exception. In the late 2000s, for example, the USA experienced a housing crash, which led to a significant drop in prices for property. Most of those markets have bounced back and some even hit higher rates of appreciation. These are the laws of finances.

Investors can neither eliminate nor control market movements. But it’s possible to reduce the risk by diversifying a portfolio and applying a strategy that factors in market conditions.    

  • Location. This is an essential factor to consider when investing in real estate as it will impact your returns. How much ROI would you get buying a house located in the region where the population is dwindling, job opportunities are decreasing, and the overall economic situation is poor? Right, no returns.

Actually, it’s your homework that you should do to outline the realistic expectations of your gains. Read reports on the economic conditions and population rates, check the statistics on jobs, etc.    

  • Liquidity. This indicator shows the ‘depth’ of the market and tells how easily you can sell a house. Generally, the nature of real estate is rather illiquid. It takes time to offload the property. Also, the liquidity rate varies in different regions. You would have dozens of buyers in Florida, but it would be much harder to sell property in Indiana.

Again, self-education is your best friend.

How profitable is real estate? 

Historically, the housing market is one of the best performers in terms of returns. Prices for property feature constant growth every year. The profit will depend on what form of investing you are looking for: buying for renting, wholesaling, or fixing. Wholesaling is a profitable option that can bring something from $10,000 to $30,000. Fixing the house for further sale is the most profitable method with potential revenue from $55,000. Though, it’s riskier. The advantage of renting out a property is in your consistent passive income.

However, you should take into account the costs tied to the purchase and maintenance of the real estate. These are taxes, expenses on repairs and inspections, utility bills, etc.

Summary

With the right strategy and knowledge, the investor is capable of minimizing the risk effectively. If we talk about real estate, it’s one of the asset classes where you have control over all aspects of investment. This isn’t rocket science but requires you to take effort.

Anyone can acquire the necessary knowledge to stack the odds in their favor and eliminate a house advantage. It’s up to each individual to decide whether they want to beat the house and invest with advantage, or risk money by gambling.

Listing Additional Info

  • State: California
  • Address: avlon park
  • City: avlon
  • Zipcode: 08242
  • SOLD: yes
  • MLS #: 4412536987
Rate this item
(0 votes)
Bob Flores

As a high quality financial analyst I have spent the past five years working with individuals and companies to help them in financial issues.  I have bookkeeping experience and find myself  as a Freelance writer. I am writing now about financial issues, new trends in the financial world like cryptocurrency and blockchain and everything that relates to the business world 

DocuSign 30 day free trial

Search by State:

Agent Resource

How to capture your next prospect - click here

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.