Real Estate Investments

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Doctors Must Understand the Unique Risks

[By Julia O’Neal; MA, CPA]

Real Estate [RE] requires a separate discussion of unique risks relative to other financial asset classes. 

Macro Economic and Other Risks 

RE investments possess not only the macro-economic risks found in all financial assets, but other unique risks, as well.

For example, these risks include illiquidity, lack of a continuous auction trading market, and quoted prices that may or may not represent intrinsic value.  

Lack of Diversification 

Given the large size of many real estate projects, it may also be difficult to diversify adequately and reduce total portfolio risk.

And, because of the chance of segmented markets, the risk of imperfect information is also present.  

Assessment

Remember, real estate is not easily divisible and is nonhomogeneous; such risks cannot be fully negated through diversification. 

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Conclusion

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3 Responses

  1. Real Estate

    Millionaires across the U.S. say commercial and residential real estate is the best alternative-asset investment option for 2014.

    In fact, one-third of millionaires surveyed in a new Morgan Stanley study plan to purchase real estate this year, according to a report by Bloomberg.

    Sergie

    Like

  2. Real Estate

    Investing pros and cons … for doctors.

    http://medicaleconomics.modernmedicine.com/medical-economics/news/pros-and-cons-investing-real-estate

    Dr. Harbaugh

    Like

  3. More on Real Estate

    To make sure the RE process is safe you’re going to want to make sure an attorney or title company, or escrow company handles all the paperwork on your behalf as the closing agent.

    The good thing about this is traditionally you can have the borrower pay all costs involved out of the proceeds. Never sign a check to the real estate investor yourself, make sure this is all done through a professional third party to handle the closing.

    To further protect your investment you’ll also want to make sure the real estate investor gets title insurance and property insurance with your name as the “loss payee” to protect your investment.

    After closing and you have provided the funds the closing agent will send you all the paperwork including the mortgage or trust deed with you in the first position.

    I’m an active real estate investor currently looking for partners to help secure properties. I buy properties at huge discounts and often need silent partners to help fund deals. I am often willing to pay larger percentage points for short-term private money loans.

    Steven Hale

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