The Risk Matrix

You want a RIG not a WAG

Over the next several days we will discuss Risk Assessment and Management. We will cover several types of risks in real estate investing and how to mitigate them.

The illustration below shows a traditional simple risk matrix. This will help guide you toward asking the right questions about any project before proceeding. This is not just for real estate, but for any endeavor. 

To use this matrix you will have to quantify an issue that is not always easily quantified. A bit of guesswork may be required, but do your homework to make a RIG (Reasonably Informed Guess) rather than a WAG (Wild Ass Guess). 

Take any issue (and a real estate project may have dozens of them), select a value for both the probability and the impact, multiply them together and you will have an understanding of the risk.

It’s a complete investing “education” and it’s completely free. Do you have some friends who need some love?