Although real estate is generally a safe, long term investment for most investors, there is a certain level of Risk associated with any type of investment. Similar to other investments, there is always a chance that you will lose money some or all of the money that’s invested. The most common Risk that many residential homeowners should consider is a natural or man-made disaster that could damage the property itself. A fire or tornado can cause tens of thousands of dollars in damages in just a few minutes. To mitigate this particular risk, many people buy insurance for their property and its structures. There is also risk tied to the actual value of the real estate. Like other investments, real estate prices are dependent on the market. That means that it is possible for the price of a property to increase or decrease over any given time period. It should be noted, however, that most dips in the market are short-term and most homeowners simply wait for the market to improve before selling their property. There is also Risk involved if you plan on using your property to generate income. Renting out your property carries a unique set of Risks, that can include a variety of issues with tenants. A good rental insurance policy is necessary to leverage against this Risk specifically. Rental properties are also subject to the same increases and decreases that primary residences are subject to and fortunately for real estate investors, recent data has shown that decreases in selling price often correlate with increases in rental prices. Generally stated, Risk is the extent of uncertainty that is associated with an investment’s rate of return.

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