Risk tolerance and The BREISystem

The first question any investment advisor will ask before you invest is “What is your risk tolerance?” or “How much risk can you handle?”

To help you answer this question, commonly advisors would give you a small quiz to determine your risk tolerance level. Depending on the investment type, your advisor might show you a chart of how much risk you could handle based on your current age – for example, in a 401K investment.

However, I like to take a different spin on measuring risk tolerance. From my own personal experience, I don’t believe risk tolerance can be determined by age or by a set of standardized questionnaires. The reason is because these strategies are only successful in measuring an investor’s ability to take risk.

Risk tolerance isn’t about your ability to take risk; it’s about how much risk you’re willing to take before you throw your hands up.

I believe an individual’s willingness to take risk is intertwined with that individual’s personality.

Understanding your personality type and behavioral tendencies under certain situations can give you greater insight on how much risk you are willing to take with your investment.

There are four distinct investment personality types. Within the different personalities, I attach a certain level of risk tolerance – this is the ability to take risk. I also list below how my Busy Real Estate Investor System (BREIS) compliments each personality.

Type of Personalities	My Services
Cautious investors– make decisions based on fears. If they hear some type of money losses, they will pull their money out. They can’t stand any investment losses. They have trouble trusting advice from people. They have zero risk tolerance.	When analyzing the performance of each property, I use the “worse-case-scenario” numbers. Thus, giving the my investors a peace of mind knowing that even in the worst possible situation, their investment will still profit.
Meticulous investors- make decisions based on facts and research, tending to analyze all details of an investment. They take advantage of experts’ advice to help them with their investment portfolio. Because they are such perfectionists, they have low risk tolerance.	I use 10 levels of research to help my investors invest in any one property. With my BREISystem, I combine my investors’ unique needs and goals with the same meticulous research required by large financial institutions to assure that the investment will and does meet or exceed their wealth building goals.
Individualist investors – like meticulous investors, they make decisions based on hard facts and investment research. However, they are self-doers and tend to make decisions based on their own research instead of utilizing a team of experts. They have medium risk tolerance.	I encourage my investors, if they have the time flexibility, to come along with me as I analyze the different properties. My investors choose how much time involvement they want to invest in a project.
Spontaneous investors – make decisions based on feelings. They invest on others’ opinions of the performance of a certain investment product. They tend to second guess their decisions and frequently change them. They have high risk tolerance.	The goal for spontaneous investors is to make money now. This will confirm that they make the right decision. The biggest advantage of my BRIESystem is that it is actually a “cash flow system.” My investors make money when they buy, every month they own the investment, and when they sell.

Are there any specific real estate investment risks? Sure there are!

All investments come with risks. You can’t completely eliminate risk but you can minimize it.

The key to minimizing risk is to remove all preventable surprises. In real estate, these are low or no cash flow, lack of tax benefits, loss of management, etc.

As a Qualified Real Estate Investment Project Manager (QREIPM), my job is to make your life easier when you invest in real estate.

Here are three main components in which I use to minimize your risk and maximize your returns:

Determine your investment goals - once you have a clear idea on what you want from your investment, you will be able to look at an investment and determine if it will help you reach your goals. I will help you buy only those investment properties that will help you meet or exceed your goals.

Strategically analyze investments – experienced investors make calculated risks and have reasonable strategies before entering into an investment deal. Without strategic analysis, they know they have better luck at a Vegas casino than winning the real estate game. I use a very stringent research system to make sure that every property you buy will elevate you closer to your financial goals.

Effectively use a team of highly qualified experts (will be a link soon) – Real estate investing is a business. Every successful business needs a team of people with different specialized skills such as: accountants, bankers, attorneys, realtors, insurance agents, etc. I have assembled a team of the best of the best real estate investment experts in Western PA to help you sprint your way to real estate success.

There are risks in every investment. You can’t completely eliminate them but you can significantly minimize them.

Did you know that real estate investments can actually protect you from the most common investment risks? Learn about it here.

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