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How to Be Conservative When Analyzing Commercial Real Estate

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If you've heard about my most recent property, you'll know that I bought it at the top of the market, paid someone over $200k more than they paid for it only a year earlier, and need to make six figures in revenue just to break even.

Scary, right?

Yes, for most people. Not for me.

This was my peaceful cabin in the Blue Ridge Mountains (she's doing great by the way, right on track, and was in the top 10% of her market in just the first 3 weeks).

The reason I bring all of this up is I want to talk about RISK.

To be a successful Lifestyle Asset investor, you need to understand risk.

Especially, you need to understand yourself.

Risk is the potential danger we expose ourself to in order to also expose ourself to the potential upside.

Not only must the upside outweigh the risk—you must be willing and able to face the risk (the potential downside).

No investment is without Risk; however, good investors don't make risky decisions.

What I mean by this is simple - what is the exact risk (worst case scenario) you expose yourself by making a particular investment decision?

This ought to be quantified. It needs to be understood.

And then you need to know all of your exit, mitigation, and remediation strategies should you ever have to face all of it.

In this case, the key risk is losing money on the property if we don't achieve high enough bookings to cover all expenses and produce profit.

I have a solid portfolio. It does over $500k in passive income annually.

I can comfortably expose myself to the risk that this new property only does "okay" instead of "great".

More importantly, I have unfair advantages I can deply to VERY confidently get myself and my property into the top of this market, which is where I need to be and where the massive returns are.

So - for me, this was not risky. I can fairly easily (even if begrudgingly) manage the worst possible downsides, and I'm very confident in my ability to capture the upside.

See?

"Risky" property

Not-Risky investment for me.

For most any other investor, buying this property in the way I did would be too risky!

IMPORTANT:

When you are first getting into Lifestyle Asset investing and purchasing your first 1-2 properties, you MUST master and understand the risks in each property analysis you are considering, and hold it up against your personal risk profile, which is a part of your buyer blueprint (all things we get you VERY crystal clear on in the program BEFORE you start looking at properties).

Buy a property that another investor could succeed with but you aren't ready for, and it's a recipe for disaster.

Buy a property that fits your current ability to face risk, that has both exciting returns but also acceptable risk based on your current assets, lending options, and long-term goals, and you have a process you can comfortably repeat and succeed with.

You do this by making ourselves better than anyone else in the market at property analysis. You understand the market itself (not just the house), you look at all the potential outcomes and positions in the market, and then you ask yourself if you're ready for the particular challenge of that property, that market, that position, at that time.

When you really understand how to do this, you don't worry about risk. You expose yourself to it carefully, willingly, and wisely.

You do it only when the upsides greatly outweigh it and you have proven to yourself that you could survive and ride out even the worst downside.

In this way, you conquer risk and make it yours. All while others stay out of the market because they don't understand and conquer risk.

If this all sounds foreign to you, recognize it is because you don't understand the game. Everything is risky in a game you don't know the rules of.

If you'd like to learn the rules of the game and how to master risk so you can capture the upsides of Lifestyle Asset investing, book a call with us, and we can show you some recent deal examples and what the risks/rewards look like.

When it comes to commercial real estate investments, there are a lot of factors to consider. Understanding the best practices for being conservative when analyzing a potential investment is important. By using the right commercial real estate formulas and reading the right commercial real estate investment books, you can ensure that you are making the right decisions when it comes to investing.

At Vodyssey, we understand the importance of being conservative in property analysis. That’s why we provide our clients with the tools they need to make the best decisions when investing in commercial real estate. From learning the right formulas to reading the best investment books, we provide our clients with the resources they need to get the most from their investments. Through our services, we help clients make the best decisions and get the most from their investments.

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