Post # 3 # Initiated week :iron Man
A few days ago a friend returned with the honorable title of Ironman.
He had a long competition of marathon, swimming and cycling, and I was really moved by his mental and physical ability to meet this impressive challenge.
Then I thought a little deeper and tried to find a parallel to our real estate world.
Competition that includes running, swimming and cycling combines different capabilities of a person, but we as real estate investors can also spread the risk between different types of investment, between different investment capabilities and get a mix of investments based on different types of risk.
Let's start with swimming, an industry in which we deal with one of the most difficult forces of nature - the sea, and the higher the waves, the more challenging our swimmers will be.
If we compare it to our real estate, we can think of the market fluctuations as a wave of the sea waves of course. The more we invest in market-dependent transactions, the more we will be affected by market fluctuations, for better or worse, of course. If we invest in the flip and the middle of the market, the market will go down, then we will be exposed to spiritual decline or sometimes loss. Conversely, if the market surpasses our spirituality can surge and then we may sin in vanity and think we are geniuses. This situation is extremely dangerous as we may then allow some of our defense mechanisms and sometimes take smaller-margin deals because "the market is rising".
Remember Warren Buffett's sentence "When the Depression Comes Suddenly You See Who Swim Naked." So in any case don't give up on your basic rules, your desired margin, and informed risk analysis.
The stage of running the Iron Man seems to me to be long-term deals that are less dependent on the short-term market direction that those who stay long enough will eventually benefit from elevators. In this context, the phrase "Don't wait to buy real estate, buy real estate and wait"
Some investors prefer an investment with high value and low yield, some prefer a moderate increase in value but a high cash flow return. It does not matter who you are, as long as you are running long distances.
The final stage we'll talk about in the context of the Iron Man competition is riding a bicycle. In my view, the real context for our real estate world is riding on any investment instrument, whether it is leverage, or riding an owner financing or subject to deal. Any instrument invested in it in one lever or another will increase the yield on the one hand if everything works according to the plan, but also increase the risk of course if something does not work as required.
Therefore, if you choose to ride any leveraging tool, make sure that your risk analysis is excellent, and if you can reduce leverage and not use the maximum possible you should consider it seriously.
In leveraged transactions, yields are empowered on the one hand, but the mirror image is to increase the loss. In the wrong use of leverage, it can end with the total destruction of equity.
So the bottom line is that I spread my investments, some leveraged and some are not, part of the short term and part of the long term.
There is no right or wrong because everyone has his own perception of risk, but in my opinion the risk must be spread.
In conclusion, I wish you would be a financial ironman.
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