Risk Tolerance Essay

570 WordsApr 3, 20113 Pages
My risk tolerance has to do with my position in real estate. I am a realtor and real estate investor who currently buys pre-foreclosed homes. These are homes that are still owned by the individual (not the bank), but the individual is currently in default and not up to date on their mortgage payments. I have been in this “short sale” business since the beginning of 2008, roughly two years after the market went sour. I have had my real estate license since 2004 but realized the foreclosure market is more lucrative for me in today’s society. In buying pre-foreclosures, unfortunately cashing in on other peoples misfortunes can make you rich. Like many people in this business, I would describe my risk tolerance in this subject to be aggressively high. In this case, with the homes I have bought since starting three years ago, I have been renting them out in hopes of the real estate market picking up and getting back on track as they were five years ago. By renting them out I incur any problems and issues the house has while being rented out, such as broken appliances, plumbing, electrical, roofing, etc. Also with this high-risk tolerance method I take on all insurances and taxes that need to be paid on the homes. Some of my homes have mortgages and home equity lines, which means I pay, interest on the borrowed money as well. These all cost me valuable dollars as a landlord trying to make it through the other side of this dreadful market. However, the upside of this renting method could potentially have a great reward. Soon the market could turn around and by waiting I could potentially double, even triple my investment I have into each home. There is another side to this risk tolerance theory. If I were to play it “safe,” in the current down market, I would flip the homes by buying them low and selling them low. I would not have to worry about always trying to keep the

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