Risk

Definition: Uncertainty about outcomes, including the possibility of losing income or invested capital. Real estate risks can arise from markets, operations, financing, physical hazards, and legal conditions.

Example

A rental property's owner considers vacancy, repair costs, and refinancing uncertainty before purchasing.

Keep the distinction clear

Risk is not eliminated by a projected return. Different risks require different responses, and insurance covers only the exposures included in the applicable policy.

Related terms

Dynamic Risk · Static Risk · Investment

Keep studying

Income Approach: NOI, Cap Rate, Property Value, and Cash-on-Cash Return

References: FREC Course II syllabus: investment concepts

Pronunciation (US): RISK (capitals show stress)

Pronunciation reference: Merriam-Webster