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Isaac Gutman: Before Investing in Real Estate Know the Risk Fundamentals

Isaac Gutman is a real estate developer, investor, and entrepreneur with decades of experience in the NYC real estate market, Isaac Gutman quickly progressed from employee to starting his own firm and ultimately ascending to become a leader in the country’s most exciting market. Isaac Gutman is the President and founder of Ryer Real Estate Group, one of the city’s leading real estate investment firms focusing on the top developing and managing residential, industrial, and retail assets.

Isaac Gutman and Ryer Real estate own and manage more than 70 assets throughout NYC and the surrounding areas. Gutman and his team at Ryer are passionate about delivering top-notch cutting edge projects using creative innovation and green building strategies. Gutman looks forward to contributing to the exponential growth of New York City and the Bronx skyline utilizing exemplary professionalism and support to the local communities and neighborhoods where Ryer is active.

There’s a lot of money to be made by investing in real estate. Before diving in, however, it’s important to have all your ducks lined up and a solid understanding of the potential investment risks you may face as you continue on this endeavor.

Real estate investing has two key pieces that each investor must consider: risk management and financing. It’s important to have a solid understanding of both before getting started in the industry. Many investors find that a solid support system or a knowledgeable mentor can provide them with the information and tools they need to get started on that investment journey.

Market risks exist in any type of investment opportunity. In order to help mitigate the risk of losses in the market, consider:

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  • Who is your customer? How do they relate to your product? In most markets, you need to clearly identify a customer’s pain points or needs before marketing. In real estate investing, that may mean identifying your target market—that is, who will rent your properties—and how that individual or entity will interact with your properties.
  • What competition do you have in the market? What other local real estate investors are making the same purchases you are? How do their properties compare to yours? You may want to look at what prices others are charging for rent or when they fix and flip houses, what amenities landlords are offering, or other solutions.
  • How will you handle the logistics of your properties? Do you have a plan in place for collecting rent? What about dealing with problems with the properties? Handling maintenance requests? By setting yourself up for success ahead of time, you can avoid many of the potential pitfalls associated with investing.

General Risk

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Operational risks are the day-to-day operating risks associated with handling your real estate investments. Consider:
Manpower. Who do you need in order to manage your investments appropriately? You may need financial advisors who can help you manage the profits from your real estate investments as well as property managers, a maintenance team, and other people who can help make the most of your investments.

Retaining talent. Once you do have a team in place to help you manage your rental properties, how will you keep them? If you have a property manager who is great at her job, you want to keep her, not see her scurrying away to a competitor due to poor salary, benefits, or working conditions. In times when the economy is strong, it can be particularly difficult to retain solid talent for your real estate management needs.

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Overhead. You may have ongoing operating expenses associated with your rental properties: keeping the lights on when a unit is empty or in communal areas, paying for maintenance and upkeep, or the expenses associated with the people needed to keep your property running effectively. Make sure you know what your overhead will look like so you can set your prices accordingly.

Regulatory challenges. State and local regulations govern how you, as a landlord, can interact with your tenants. Keeping up with those regulations can, in many cases, prove to be a full-time job all on its own. Make sure you’re familiar with all those laws and mandates so that you can keep your properties moving smoothly and avoid expensive fines.

Know Your Financing

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While you may not be feeling a credit crunch in the consumer market, small business owners are having a hard time getting banks to guarantee loans. You may also take on some risk to your credit when you invest in real estate—and it’s important to understand what that might look like for your business.
Improve your understanding of the real estate financing terms before buying a property. Make sure you understand interest rates and potential penalties. Take a close look at whether your mortgage includes early payment penalties as well as how much you’re responsible for paying each month.

Make sure you understand the process. Before diving in, make sure you know how long it will take you to secure a loan and what your terms are likely to look like. As a real estate investor, you may need a solid down payment before a lender will partner with you.

Consider creative financing solutions. Those solutions are out there, but they’re not easy to come by. It may take hard work and sweat to raise the capital you need to get started.

While real estate investing has immense rewards, it also has a number of risks that you must carefully consider before you start investing. By better understanding those risks, you can also better understand how to avoid them and set yourself up for success, ultimately leading to better profits and higher returns on future investments.
Follow Isaac Gutman on twitter here: https://twitter.com/isaacgutman2

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