Dani Lynn Robison argues the loan amount, not expected returns, is the biggest risk in real estate. In 2008, investors lost solid properties because they were over-leveraged, not because the assets were bad. She recommends keeping loan-to-value ratios around 60-70% to survive market downturns.
The most dangerous number in a real estate deal isn't the return. It's actually the loan amount. And here's why. Real estate goes up and down in value. That's normal. But if the loan is too big and the value drops, you're in trouble. The people who lost properties in 2008 usually didn't have bad real estate. They had too much debt on good real estate. Smart investors keep their loans at 60-70% of the property value. Not because they can't borrow more. Because they want the investment to survive anything. More debt could mean more risk, even when everything else looks great.
Physicians and High Earners — What Real Estate Can and Can't Do for Your Taxes
