Low Risk Florida Real Estate Investments

Safety of Florida real estate investments

What is a Low Risk or Safe Real Estate Investment?

As I begin to write this article I realize that there is no working definition for a "safe" or "low risk" investment. How do you really evaluate risk?

For some it means doubling down at the blackjack table. For others it means stuffing your money under your mattress.

But, it is a question that I get asked over and over again; "Is this a safe investment?"

Let's begin with some baseline definition of "safe".

The Investment Safety Scale

The only way to get a handle on this is to compare Florida real estate investing with other forms of investments.

Bank CDs, Fixed Annuities and Treasury Notes

I would put this at the top of the scale in terms of safety of principle and guaranteed return. But, some financial advisors would argue with me. They would say that the danger of these investments are the net loss against inflation.

If you have a $100,000 investment that earns about $1,500 a year, the danger is in the loss of buying power against inflation and your inability to grow your investment. How will you ever accumulate enough money for retirement, college savings, etc. In retirement, you could easily run out of money.

If you had $100,000 in the stock market and lost $30,000, it might take 20 to 25 at years until you investment was back to the original $100,000 if you used fixed income securities like CDs.

Even the most conservative real estate investment earning a net cash flow of 6% would get you back to the $100,000 in about 6 years (without even considering appreciation and tax advantages).

The Stock Market

Until the proverbial poop hit the fan, any idiot could make money in the stock market. Then, when things turned sour, that same idiot lost a large percentage of his portfolio.

Most of us have figured out some basic truths about the stock market:

  • Stockbrokers and financial advisors do not know any more about the stock market than you do. In many instances they were just pushing a stock to earn a commission.

  • Unless you have a multi-million dollar portfolio, you are not going to be privy to the type of inside information the professionals have. This means they will be buying before you do and selling the stock to you when the rumors finally filter down to your next door neighbor.

  • The stock market moves are often the result of sentiment of the investors and not the financial fortunes of the company.

  • Stocks are not passive investments. Putting your investing on auto pilot can result in large losses before you realize it.

  • Most of us are unable to read a balance sheet or take apart an annual report. We do not have the research capability, time or access to the right data and cannot trust those who do.

By the way, the above truths hold true for mutual funds.Most fund advisors could not even beat a passive investment like the S&P 500..

For retirement planning, wealth building and income, nothing can beat real estate. You invest in real estate, wheresas you speculate in the stock market. We conservatively and carefully invest in value, income producing properties.

I do not think that anyone who is reading this page thinks that stocks are considered safe, solid, fool-proof investments.

By the way, the term fool-proof means that even a fool could not screw it up. Stocks are most certainly not in this category.

Investment Quality Real Estate

You should invest in properties that have certain characteristics:

  • The property must be undervalued. There are plenty of bargains to be found.

  • It must be cash flow positive. You do not want to lose money year after year hoping that someday the appreciation will give you a profit. That is why we generally do not buy vacant land (unless you are going to grow something on it).

  • It must be in an area that a strong rental market. You might experience a vacancy of a month or two every so often. But generally, we want to see the property producing income.

  • The property must be in good repair without the obvious threat of a major repair (unless it has already been figured into the purchase price). If you think you will need a new roof in a year or two, you want the price reduced to reflect the cost. 

If you follow these rules, you will receive a steady income and appreciation.

Also, you must always keep in mind that real estate can be a leverged investment. Even some of my clients who use their IRAs or 401K's to invest in real estate have received up to 50% loans on property. That means that $100,000 in their 401K is controlling $200,000 of income producing real estate. The stock market cannot hope to compete with that.

While not as liquid as a stock, a good income producing property is always in demand and should not be hard to sell. You can even create a means for your tenant to purchase the property with a lease-option. You get income, a bonus for the option and possibly a future sale at a profit if the option is exercised.


CDs and Fixed income securities have no surprises. The lousy return you get today is almost certain to continue tomorrow.

Stocks have loads of surprises. Remember Enron? Perhaps you held General Motors for years and years. Surprise!

Investment quality real estate holds few surprises for you. There might be maintenance issues but you will not wake up one morning to find that your $100,000 investment is now worth $20,000 or perhaps nothing at all.

If you are looking for a steady income and appreciation, nothing will beat real estate.

Please do not hesitate to call us with questions or to learn about Florida Real Estate Opportunities.