Focus and Balance, Daniel-San: Mr. Miyagi’s Real Estate Risk and Investment Guide
This can’t be as hard as figuring out your own corporate culture, right? Wrong. Real estate risk and investment can be considered one of the toughest endeavors, largely because it’s such a gamble. Daniel-San, you must concentrate, though….
Learning How to Block
When you think about it, real estate risk and investment is a whole lot like martial arts. It takes discipline. You have to react fast. There’s a lot of chance injected into it, very much like gambling. With the correct training, though, maximizing your chances of a fair cash-on-cash return — and recognizing that your everyday movements can actually be the training, the kicks and punches — via sheer grit and iron will and trust in a 4% to 6% rate of return for those liquid assets of yours invested in something so illiquid, can result in you winning the trophy despite your leg hurting from the Cobra Kai. It’s not terribly fun, but the rewards are indeed great; and despite the concept of the best real estate investments being so ‘boring,‘ you definitely can get a thrill out of a deal working out after all the risk you put in. You reap the rewards.
Simply Put, Like Karate, Minimize Your Risk. Always Block. And Strike at the Right Time.
It’s obvious when you look at Daniel-San and how he operated. Counter-striking. Since all real estate investment is high risk, even beach properties (although the sand might do you some good), go for the ‘easiest’ deal for the most part. No TIC investments, private real estate funds, or fixer uppers, please. Be on the defense. It’s the strongest offense. Stick with real estate risk and investment that’ll not leave you high and dry, such as a fee simple title in your own name with proper due diligence, analysis, testing and review reporting.
Simply put, you — and you alone — own the property completely. That’s what a “fee simple title” is. Don’t get into any leasehold ownership stuff until you’re positive that the property’s going to be hot and a hit in the industry, ready for a prospective buyer to invest, possibly in rent-to-own for zero down, and head toward the ultimate H.O.P.E. to Own goal: home ownership.
Some Terms You Need to Know Regarding Real Estate Risk and Investment
Know this stuff about real estate risk and investment like the back of your hand (or foot as you kick):
- Lease Term — That’s the length of the lease period, which is typically 55 years or more.
- Lease Rent — When the lessor’s required to use the land, this is the amount of rent stipulated.
- Fixed Period — The lease rent amount applies to this length of time.
- Renegotiation Date — This is the specific day after that fixed period where parties can renegotiate terms.
- Expiration Date — Yes, the lease can actually “expire.”
- Reversion — If the lessor gives the property “back” to the lessee, that’s what this would refer to.
- Surrender — This specifies how the lessor gives the property “back.”
- Leased Fee Interest — A lessor would have to accept a specific fee simple ownership to convey. That’s what this fee is.
Now Focus, Daniel-San
That’s just the start, though. There’s so much more to learn about real estate risk and investment. At least you have the tools, though — and the Karate belt to hold up your pants.Share