BiggerPockets Real Estate Podcast - Real Estate Risk: How to Dodge It, When to Take It, and Using It to Build Wealth

Episode Date: September 4, 2024

Real estate risk can make you wealthy or cause your portfolio to come crashing down. Like any type of investing, real estate can be risky. However, the amount of risk you take changes depending on the deal. Today, we’re helping YOU figure out how much risk YOU should be taking based on your goals and then share some expert risk management tactics so you can be prepared even if a “black swan” event throws your entire real estate investing plan out the window. Ashley Wilson started investing in real estate at a risky time. It was 2009—nobody knew if the housing market would face another significant downturn and crash again. Thankfully, due to determination (and a bit of helpful ignorance), she invested at a time that turned out to be one of the best in history. Now, running massive multifamily real estate deals, Ashley has not only survived but thrived through high interest rates, a pandemic, falling rents, and economic uncertainty. What does she do differently than most investors? She faces her real estate risks BEFORE they happen, and today, she’s showing you how to do the same. We’re talking with Ashley about risk management, how much risk you should take based on your goals, the “buckets” of risk and what you CAN control, and what to do NOW to limit your risk of loss. In This Episode We Cover: Real estate investing risks and how to mitigate them before it’s too late Dodging black swan events and what to do BEFORE a rare risk hits you The controllable risks you can plan for NOW that’ll protect your wealth during troublesome times Risk profiles based on whether you’re building, preserving, or tax-sheltering your wealth Why shiny object syndrome will cause you more headaches (and loss) than you think And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Invest in Multifamily like Ashley with "The Multifamily Millionaire, Volume I" Property Manager Finder See Dave at BPCON2024 in Cancun! Today’s Real Estate Risks: What Are Investors Ignoring? Connect with Ashley Connect with Dave 00:00 Intro 03:38 3 Types of Investor "Risk" 07:22 Investing During "Risky" Times 11:18 The "Buckets" of Risk 14:46 Dodging "Black Swan" Events 18:52 Risk Mitigation Tactics to Use NOW 23:53 The Risk of Loss Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1013 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Real estate is risky, and that's just like every other investment. After all, they say nothing ventured, nothing gained for a reason. You do need to take some risk to generate reward. And to me, there's nothing wrong with that. Risk is an important part of being an investor. The key is to be taking on the right amount of risk, given your goals, your preferences, and your personal situation. It's a tradeoff.

The more risk you take, the more potential return. Generally speaking, that is. And the less risk you take, the lower your personal situation. probable returns. And like most things in real estate investing, there's no right answer. It's about figuring out what type of risk reward profile is right for you and what you should seek out, and how to get the best quote unquote risk-adjusted returns for your portfolio. Today, that's what we're talking about. What's up, everyone? It's Dave for today's a deep dish episode. We're talking all about risk, what it is, the categories of risk in real estate, and how to mitigate it.

And to help me talk about this, we're bringing on a longtime Bigger Pockets contributor and favorite Ashley Wilson. Ashley is an investor, an asset manager, and an expert on how to mitigate risk in your portfolio. I'm excited to bring on Ashley and have this conversation with her and ask her how to plan a portfolio for events that feel and often are outside of your control, like a pandemic or interest rates changing. Also talk to her about how there might be hidden risks. at different stages of the deal process, and how to best manage and balance the total amount of risk you take on across your entire portfolio. So let's bring on Ashley. Ashley, welcome to the Bigger Pockets Real Estate podcast.

Thanks for being here. Thank you so much for having me. For people who don't know you, and you've been around the Bigger Pockets universe for a while, but for those who haven't been introduced to you yet, can you give us just a brief background? So I started investing in real estate in 2009 after finding bigger pockets in 2007. So we spent two years pretty much laying the groundwork, educating ourselves. And we were looking for an alternative way to invest outside of the stock market. We thought real estate was perfect in terms of what we were looking to achieve from investing. We started actually with house hacking. And then we did short-term rentals, long-term rents. rentals flipping, high-end flipping, ultimately landing in large apartment, syndication, and JV, which is what we do today. And would you say we, who are you referring to?

My husband and myself. Okay. So you guys have been doing this together for a long time. Yes. So I started investing with Kyle. I also partnered with my father, Tom, when we did flipping. I've worked with my brother. I've also worked with my sister-in-law.

it's kind of been a whole family affair. Today, I only work with Kyle with respect to my family, but I partner with Jay Scott on all of our businesses. Awesome. Well, you're braver than I am working with all those family members. I don't know. I don't know if our relationships could survive that. But it's cool because you've done so many different things. And I think that will be a really cool underpinning for the rest of our conversation. You've done a lot of different types of partnerships and a lot of different strategies in real estate investing over the last, it sounds like 15 years since you've been investing. So I'm excited to dig in. And this topic of risk and risk management is something I know that you have a lot of experience in and have a great perspective on.

So let's dive in. In my perspective, I feel like risk is something that a lot of new investors don't want to talk. about. It's like the Voldemort almost of investing. Like they want to look at the rosy parts of investing and the upside and not really talk about some of the potential downsides that there can be. Can you tell me just a little bit about how you approach just the idea of risk in your own portfolio? So risk for me is pretty interesting because I don't think you can have opportunity without risk. I think they go hand in hand. So when you're looking for, different investment opportunities. You have to make a personal decision with how much risk you can

stomach. So are you looking for investments where you want a quick return on your time, or are you looking for something that's more of a long-term hold? And I like to categorize most investors into three different buckets. There are investors who are into wealth building. There are investors that are into capital preservation, and then there are investors that invest for tax benefits. Obviously, you can be kind of a spectrum on any one of those three categories, but if you're pushed to it, you would have to prioritize, okay, I'm in wealth building mode. So wealth building is my primary reason for investing. If you're in a wealth building mode, you might gravitate towards new construction, because new construction comes with a lot of

of risk, but it also comes with a lot of reward, which will help you achieve your goal of wealth building. Alternatively, if you're in capital preservation, perhaps you've already made your wealth, and you're looking for a place that you can put your wealth where you can make a return so your money isn't sitting idle and you're losing due to natural appreciation and the value of the dollar that naturally starts to diminish over time, so you need your money at play. but at the same time, you don't want to stomach some sort of risk. So you might be looking for a core plus asset to invest in that's stabilized, but cash flows. So people like to call that mailbox money, which is essentially receiving the check in the mail on a consecutive basis. I love those

buckets. That makes so much sense. Like as you progress in your career, a lot of people, I think, move from one to the next to the next. But it really sort of describes well the different risk-reward profiles that are out there. Because if you're in wealth-building mode, you probably want to take a lot more risk in pursuit of higher returns. I actually saw this quote the other day that I thought it was applicable. It said, you get rich by taking large amounts of risk with small amount of money, but you stay rich by taking lots of money and taking low amounts of risk. And so when you're young, that kind of ideas, you got to take some risk as you get a little bit more success. So you probably go into that capital preservation mode. And if you're really wealthy, you're probably just looking

for tax benefits or a combination of the other two. So I think it's super important to figure out as an investor where you fall into that spectrum. What is your priority? Because something for me, if I'm in wealth building mode, that makes sense for me, a, you know, someone who's in capital preservation mode might think is crazy and way too risky. It really does come down to just your individual preferences. So, Ashley, you mentioned that back in 2009, you got started. And of course, now, in retrospect, it doesn't seem risky at all. But I started in 2010.

I started looking at deals in 2009. It felt pretty risky to me back then. And I'm curious how you weighed the risk of investing when we didn't know when the bottom was. The bottom actually came in, I think, 2011 or 2012. So how did you personally feel about taking risks in that market climate? To be honest with you, I don't think I was educated enough at that time to really understand the global view of my portfolio that I do know today. But looking back at it, why I was able to take the risk was because I still had a W2 when I started investing.

So to me, this was essentially an investment on the side with money that I was okay parting with if everything went south. That's not to say I wanted that to happen, but it was a risk I was willing to take because the alternative for me at the time was investing in the stock market. And I wasn't fully confident that the stock market was a right investment vehicle for me. So to me, what I liked about real estate, what convinced me to take that risk and take that jump is, number one, real estate, it's asset backed as opposed to the stock market. So I really like the whole concept of investing in real estate because at the end of the day, if you invest in the stock market and a company goes up in smoke, you don't have anything left. Alternatively, you still have the land if, for example, your asset burns to the ground.

So I really like that piece of real estate. I also at the time didn't realize all the tax advantages that came along. I understood some of them, but not to the level that I understand and use them to my benefit today. I resonate with the part where you were saying you didn't fully understand some of the risk. I'll just speak for myself and I was just probably too dumb to understand all the risk I was taking when I got started. Sometimes it actually works to your benefit.

I'm not recommending anyone do that. You should educate yourself, but sometimes it does actually help. But I did want to get back to something you were mentioned about comparing real estate to the stock market. Because to me, risk, it's all relative, right? People say, is real estate risky? Sure, yeah, compared to what? Is it riskier than buying U.S. government bonds? Yes, probably it is.

Is it riskier than the stock market? I think there's arguments to be made both ways. is it riskier than cryptocurrency? Certainly not. So it really, again, just sort of comes down to like what you're personally comfortable with. And it sounds like to you, you feel that being asset backed makes it the right balance of risk and reward versus other asset classes. And there is no right answer.

But I encourage people to think about it that way. If you're super conservative and you don't want to take any risk, go buy bonds. Don't buy real estate. But if you want upside, you know, and you want tax benefits. and you want a lot of things Ashley mentioned, then you may want to just check yourself and make sure that you have the right risk tolerance for it. And if you do, then go for it. One of the ways I personally like to mitigate risk is by having a great property management solution. And if you want the same, you can go to biggerpockets.com and get matched with a property manager for

free. We'll put a link in the show notes below if you want to check that out. We'll be right back. I have an uncomfortable question for you. If your rent collection drop to 80% next month, how long would your cash flow hold up? What about 70% for the next three months? Would your cash reserves cover it? I talk all the time about scenario planning. Smart investors don't just model the upside.

They also pressure test the downside. This is even more important in a down market. And that's why I like Stessa's stress test report. It lets you model different rent collection scenarios, adjust expense assumptions, and instantly compare the results to your real bank balances. It's one of 12 professional grade reports inside Stessa Pro. Try it for yourself. Visit stessa.com slash mkTG slash bigger pockets and get six months of Stessa Pro for free,

because it's better to discover your risk in a report than in a recession. Running your real estate business doesn't have to feel like juggling five different tools, and the tools are blades or flaming torches. With ReSimple, you can pull motivated seller lists, Skip trace them instantly for free and reach out with calls or texts, all from one streamlined platform. The real magic? AI agents that answer inbound calls, follow up with prospects, and even grade your conversations so you know where you stand.

That means less time on busy work and more time closing deals. Start your free trial and lock in 50% off your first month at reSimple.com slash bigger pockets. That's R-E-S-I-M-P-L-I-com slash bigger pockets. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a

sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. you can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days.

That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of, and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host.

For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense.

That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio.

check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. Fundrise Fund this and other information can be found in the fund's perspectives at fundrise.com slash flagship. This is a paid advertising. Welcome back to the bigger pockets of business. Like it's one thing in real estate. But there's a lot of different. areas where there is risk as an investor. So can you sort of give us a highlight of the big categories? Absolutely. The way I look at risk is I look at it in terms of different variables, but it ultimately comes down to controllable versus uncontrollable variables. And they fall into those two

different types of buckets. So for example, I'll take multifamily because that's the asset class I'm in. when it comes to purchase price, that's a controllable risk in terms of educating yourself on the current market state, educating yourself on all of the data that you can obtain to assess future projections. So that might look like what new businesses are coming in to that market, what businesses are exiting. Is that a business friendly market? Is it a landlord-friendly market? in terms of population growth, is it positive, is it negative? Are you in a strong school district? There are a ton of different variables, even unemployment rate at a local level. Those are all variables that you can look at, educate yourself on, and then plug that data in

to your underwriting, which means that you take that under consideration for your projections. And to me, that is a more controllable. You don't have 100% control, but it is definitely a more controllable skill set because you can underwrite and you can control what you offer on the property. But something like, for example, a pandemic can obviously be an uncontrollable variable. That's something that not only impacts the market cycle, but it also implements policy. So that is, once again, something that you can't control. You can't control policy, but educating yourself on policy, I like to say there's two things, policy and practice. Educating yourself on

policy and then practice what actually happens in a given market is something you can control, so you can incorporate that into your underwriting and then also into your general operations and business plan. And then as those variables change, you have the control. to change your business plan, change the way you operate a property and investment, change the way that you even decide whether or not to do distributions or not. So these are things that I like to run through different scenarios, and that helps you manage your risk a little bit better. I love this framework of controllable variables and uncontrollable variables.

That's such a simple and good way to put it, because as real estate investor, there are a lot of things that you can control. And I should mention that is probably one of the great benefits, at least I see, in real estate, is that if you invest in the stock market, you have absolutely no control. I suppose you could go and vote at a shareholder meeting. But you're giving up a lot of control investing in the stock market or crypto or a lot of different types of investment vehicles. But as real estate investors, we do have some control, and that is one way to help mitigate risk. But I want to go to what you were talking about with the uncontrollable variables.

These are black swan events like, you know, the pandemic that no one could have realistically predicted. Or, you know, the great financial crisis, which in retrospect seemed obvious that it was going to happen, but most people didn't see that coming either. And of course, as investors, we probably won't see the next giant thing coming before. But from what I understand what you're saying is the way you approach it is just trying to understand some of the variables that could happen and sort of game plan how you'll translate changing variables in the bucket of things you can't control and how you will react

with the things you can control if one of these eventualities or scenarios should arise. Is that a right, correct summary? Absolutely. And so let's just do a hypothetical here. We all are expecting interest rates to go down. But let's just imagine interest rates went up another percent. Big surprise, right? Something that's out of your control.

How would you as an investor sort of look at that uncontrollable variable and try and mitigate the risk of it with variables that you can control? If interest rates were to go up, things that you could control is in terms of your business plan. So now you're looking at the business plan and you're realizing, oh, we might need to hold this property either the whole. full term of what we originally projected or potentially even past those original projections. So in terms of how you look at your capital expense projects, a lot of people like to,

especially with distressed assets, kind of, you know, put lipstick on a pig for lack of a better way of saying that they take shortcuts for doing repairs on a property. You can argue both sides of it, but ultimately you're doing it for a business decision, right? You're doing it because you don't want to expend more capital than it's needed for that hold period. Well, if now all of a sudden you foresee your hold much longer than originally projected, when you're coming up against a roof repair instead of patching the roof, you might look for a full replacement because you now are going to hold that asset longer. So that is something where, you know, that's a very micro level example of something you can change.

Alternatively, you also have to think about how. am I working on my business, not in my business. And when you look at it at a macro level and you look at it from a business perspective, you have to ask yourself whether or not the new interest rate environment is the norm and you can continue doing your business and operating under those same conditions or the new conditions, right? So you have a higher interest rate environment. Does your underwriting your asset management, your general operations lend itself to this new interest rate environment, or perhaps should you pivot and look for other opportunities elsewhere and determine whether or not it's a better strategic move overall as a business to change course?

I think this is really important for people, especially in this type of environment, because if you're looking at the economy, there are a lot of uncontrollable variables right now. There always are. And I think that's the reality we have to accept as investors. but right now there are a few more things going on. The interest rate environment is a bit confusing. There's a lot of geopolitical turmoil that I don't think, at least I don't fully understand how that might impact the United States and our housing market.

There are just a few more things. But I think what Ashley's saying and demonstrating here is that there are actionable ways that you can change your business and mitigate risk and continue to create value, even though there are things that are out of your country. control. We do have to take one quick break to hear from our sponsors, but we'll be right back. What if your CRM actually did the hard work for you? I know, crazy. ReSimply lets you pull seller lists, skip trace them at no cost, and contact your leads by caller text without bouncing between apps. Then it's AI agents take over. Answering calls, following up automatically,

even grading your conversations so you can focus on the deals that matter. Everything's under one roof designed to simplify your day and scale your business. Start your free trial today and lock in 50% off your first month at re-simple.com slash bigger pockets. That's R-E-S-I-M-P-L-I dot com slash bigger pockets. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there. It's in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport,

while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taking care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. For decades, real estate has been a

cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming Sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you.

Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Tired of traditional lenders holding you back, host financial is here to change the game. They've ditched the DTI restrictions and they zero in on what really matters, your property's income potential. So no more chasing papers for tax returns or personal income statements. Think about it. A lender that values your property's worth over your paycheck. That's the host financial

difference. Approved in 47 states, they are ready to help you make your next big move. Curious if you qualify, just head over to hostfinancial.com and find out. Stop letting outdated lending practices hold you back. That's hostfinancial.com where your property's potential meets unlimited financing. Thanks for sticking with us. We're back with Ashley Wilson. Ashley, I want to quickly ask you about the things that are in your control. You actually already mentioned purchase price as a great example of something that you can control. Are there other risk mitigation tactics that you can control that you would recommend to our audience? In terms of your general operations, this is something that you can control because you can look at the data and you can see what is coming down the pike.

So something that I like to look at, even though we are currently not in new development of multifamily, when you look at in terms of properties that are coming online, we still have a deficit in terms of demand versus supplies. So you have to take that into consideration when you're assessing where you want to push your rents or how much you want to push your rents or how much you want to push your rent. So looking at general occupancy trends, looking at supply that's coming online. Why that matters in terms of what you can control is if you see properties that are finishing, you want to be very cognizant of that because you want to make sure that you have incentives for people to stay at your property. So giving stay bonuses, it is very important, in my opinion, to do that right now. Pre-pandemic, the average cost for a unit to go vacant and then release was between $5,000 and

$10,000. Today, it's more like $10,000 to $15,000. And I was actually shocked by this, but when you break it down, that's inclusive of days that that unit sits on market idle, your marketing spend, your team's efforts, and the renovation cost from when that property becomes vacant to having at least ready. All of those expenses have gone up. So this is data you know that you can now control in your business plan to give more incentive to stay because ultimately it's cheaper for you to even give one month free than to shoulder a $10,000 to $15,000 expense hit across multiple categories. So it doesn't seem so transparent that that's what it's actually costing you. That was just a masterclass on how to use operational efficiency and operational expertise.

Clearly, you are an expert, Ashley, on mitigating risk because there are so many people, and I imagine a lot of investors are out there looking at these trends like vacancy and, you know, the supply gluts that people are talking about. And you can get sort of locked up with fear. But you've just demonstrated how using data and using your expertise, that you can actually mitigate those risks. You don't, you know, doing things proactively, like not pushing rents, offering stay bonuses. These are things that anyone can do.

And I know that Ashley is talking about multifamily rents, but these principles apply to any type of asset class. You know, if you know that you're facing a lot of competition in a rental market, you better do your best to hold on to great tenants that you already have, whether it's a single family home or a multifamily. asset. And this calculation that you need to do about turnover costs that Ashley mentioned, just like how much you pay when a tenant leaves you need to replace them, is something you should be really considering because turnover is a huge risk, that loss of income is a huge risk that I think a lot of times tends to be one of the easier things you can mitigate. Like if you, you know, are a good landlord and, you know, have a good relationship with your tenants, offer these stay bonuses, that feels like one.

that you can gain control over. So thank you for sharing that example, Ashley. Absolutely. And one other thing that we do is we like to try to implement stacking on top of any sort of programs that we put into place. So it's not even just a stay bonus, but a stacking method would also be, okay, we recognize that there's a cost associated with our staff trying to get someone to release. So not only offering a stay bonus, but a step-down stay bonus.

So the sooner they renew their lease, the more incentive there is. And that way, it frees up our staff's time. So this is something, again, you can control, but it's all about understanding the environment in which you operate. And then looking at all of the variables that are impacted by day-to-day operations and seeing how you can maximize the overall return. So multifamily is obviously in terms of pricing governed by the net operating income. So when you're in a situation where you can figure out how to save dollars that exponentially translates on the sale price, that's why it's really important that you focus on all of the details.

Wow. These are such good. So practical, very actionable tips that I hope everyone is thinking about and writing down right now. Actually, before we let you get out of here, I want to just ask you about your own portfolio and approach to risk. Because I think some people look at their own risk tolerance and say, I, you know, I have a high risk tolerance, so I only flip houses. I, on the other hand, I try and sprinkle it around. I buy low risk deals. I buy medium risk deals.

I buy high risk deals to try and land somewhere in the medium risk category. How do you think about it? I'm similar to you. I don't know your entire portfolio, but I think when I look at my portfolio, one of the things that I look at is, yes, from an operator perspective, we like to have some diversification, but I also like to play to my strengths. If you're in a situation where your company has multiple strengths, then go for it. But if you're in a situation where your company is really strong at one thing, I would say don't be distracted too early and pivot because then you ultimately don't end up being an expert in anything. You're just kind of good at a lot of different things.

So I would say make sure that you hyper focus, which is really difficult for entrepreneurs to be honest. I mean, that's how we land in real estate is because we're attracted to shiny objects. It's our greatest strength, but it's our greatest weakness. Yeah. So, you know, you have to be mindful of it. But I think from a passive portfolio, though, I like to have a lot of diversification because it provides a lot of different opportunities from a cash flow perspective, from a tax perspective, and from a wealth building perspective, you have that upside.

But the one thing I will say, and if no one takes anything away from this entire podcast, but this one thing that I'm about to say, which is never invest unless you're willing to part with that money because ultimately it is a risk. There is no guarantee when it comes to real estate investing or investing in any other company. So I am the first to say, especially we have, sometimes we have investors that come to us and say they only have X amount to invest and they're a little nervous about investing. We say more knows to investors than we do yeses and all of those knows are folks like that. Never invest. Never invest with. someone who will tell you, oh, just try it out if you don't feel comfortable. You should always

think to yourself that this is money that I'm okay with losing 100% of. Learn from your investing wins and your losses. Learn from other people's wins and losses get better at vetting investments, markets, market cycles, but most importantly, get really good at vetting operators and teams. that to me is the difference maker when you are faced with different investment opportunities. I always, always, always go first on the actual owner-operator. That's what sells me on an investment. And then I look to see if every other variable supports what that operator is saying. From the market to the demand within that market to the product that we're investing in,

it's really, really important, though, to know the operator. Wow, so much in there that I loved and totally agree on vetting operators as a passive investor. I think that makes sense. And really want to underscore what Ashley said about the risk of loss. You know, you do what you can. You mitigate risk the best you can. But there are sometimes things that you can't control.

Sometimes you just make mistakes. And you do lose money from time to time. And that is part of the game. And I think you just need to mentally wrap your head around that. And most successful investors have lost money at certain points. The key is to win more than you lose. And to not risk so much that you can't keep playing the game. I think to me, that's like the other thing is like if you don't have a lot of money to invest,

stay on the less risk side of the spectrum. You know, if you're new and you're just starting, I know I said earlier that you build wealth by investing a little bit of money at a lot of risk. I'd say like maybe once you have three, five deals, you can start elevating that risk profile a little bit. If you're brand new, just hit a single. Get in the game. Try and learn as much as you can.

For me, if I were starting over, I would focus on not losing money on my first deal rather than trying to make a ton of money because you're going to learn a lot and every deal is going to get subsequently easier. So I totally agree with that. And just want to thank you, Ashley, for all of the insight that you've provided today.

has been really helpful. I have certainly learned a ton from you today. If you want to learn more from Ashley, we will put her contact information in the show notes below. We will also link to her Bigger Pockets profile. Ashley, thanks so much for joining us today. Thank you again. Absolutely. And thank you all so much for listening. If you enjoyed this episode, make sure to leave us a five-star review on Apple or Spotify. For Bigger Pockets, I'm Dave Meyer, and we'll see you next time. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show,

Dave Meyer. The show is produced by Ian K, copywriting is by Calicoe content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose.

And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.