How to take Calculated Risks now for Long-term success

Are you trying to take calculated risks that will set you up for long-term success?

I’ve made several pivots throughout my career in real estate, and each time I do, I find myself looking bigger, and thinking more long-term. When I first started, I mitigated risk by paying attention to the micro details – saving money on things like baseboards and paint. Now I am looking at the macro details and thinking more long-term. Long-term thinking requires more than just a goal. It requires systems that can help me reach my goals, even as they evolve and grow.

Here’s how you can make long-term calculated risks in your investments:

Understand Your Goals

Before you can calculate your risk, you have to understand your goals. For me, my goal isn’t to hit a home run on a deal. My goal is “don’t lose money.” Mailbox money is great but not at the risk of losing your mailbox. That’s why I often look for distressed real estate deals. I’ve found you can have more margin of safety in things people don’t want because you can structure the deal more appropriately to you with a higher upside while protecting your downside. 

Doing this looks like playing your own game, sticking in your own lane, and doing the things you know how to do. Create a “buy box,” or criteria for what you can buy that will help you achieve your specific goals. Once you’re crystal clear on this, you can begin to create systems that sustainably keep you on the path toward these goals.  

Perfect Your Systems

Goals are great for setting a course and helping you achieve one-time success. Systems, however, are great for repeated success. If you white-knuckle your way into achieving your goal, over the long-term you will default to the level of your systems. These systems allow you to make mistakes, leverage, grow and expand by making more calculated risks. 

But how do you know what systems to create? 

Take your goal and reverse engineer it. You don’t have to know everything or do everything yourself. But if you can put together a system, you can put together a more effective team to fill in your gaps. Systems can also act as a guide. They will help you know which calculated risks you can take, and which ones can’t be supported at any given time. What makes sense for one investor might not make sense for another. 

Prioritize Due Diligence

In commercial real estate, there are no guard rails. Because there are fewer disclosures than in residential real estate, sellers might try to stick you. Maybe they know tenants aren’t going to renew their lease, or a neighboring property has been contaminating the groundwater. In commercial real estate investing there is so much more to consider than just the price. And that’s why you go through a due diligence checklist – to help you make a more calculated risk based on all the information, not just what appears to be a good deal on paper. 

I have a 72-point due diligence checklist so I don’t have to risk missing something each time. My checklist includes questions like:

  • Do you have market understanding?

  • Has something changed throughout the buying process?

  • Is everything dependent on one thing like a freeway off-ramp being added to this area?

I’ve found if you don’t have a checklist asking thorough questions like this, you will miss things. And that could cost you everything. 

Obstacles and suffering are inevitable – either you suffer from the discipline of creating and implementing good systems or you suffer from the consequences of overlooking these details. Sure, it’s tedious to get hyper clear on your goals, create appropriate systems and do the due diligence checklist. But doing your homework upfront and making calculated risks is what will help to sustainably support your long-term goals and success. 

For more on making long-term calculated risks through due diligence, listen in to my conversation with Sam Wilson on the How to Scale Commercial Real Estate podcast.

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