Risk Tolerance

Risk Tolerance is the investor's willingness to withstand the unavoidable changes in their investments' value. Every investment comes with a risk that their investment will result in a loss. Risk Tolerance is the amount of risk an investor is willing to tolerate. The real estate market can vary, which is a risk an investor needs to consider when investing. When figuring out your risk tolerance, it is important to remember your goal of your investment. Having an established, preplanned timeline for when you plan to withdraw the money you've invested can be a big factor in deciding how much risk you're willing to take. Investors may also run into the problem that their property suddenly is valued at significantly less value than what they paid. An investor should always know the risk, not only the percentage but the impact. For investors who paid for their property in full a bigger risk might be tolerable, but maybe not for those who will have a higher mortgage that rent may not cover without full occupancy. Those investors may decide not to purchase a specific property based on the risk that comes with it.