As in the past, real estate investment seems to be one of the most popular and one of the best ways to create long-lasting wealth. Although it is considered a risk-free and solid type of investment among the public. Just like in any other type of business or investment there are certain risks you need to navigate.
These risks can be listed as follows;
1) The unpredictability of the market
The real estate market has been growing quite well in recent years; however, there is no guarantee that this positive trend will continue. Due to ever-changing economic conditions, the real estate market is known for its ups and downs. In real estate investing, the economy has a very important effect on the value of real estate. Therefore, there is no guarantee of making a profit when you decide to sell an investment property.
2) Risk of vacancy (For rental properties)
Real estate investors should prefer good locations with high demand to avoid this risk. These places are usually safe neighborhoods with nearby amenities such as transportation, shopping malls, and schools. As a result, buying investment property does not automatically guarantee 100% occupancy and quick profits. This risk must be taken into account.
3) Structural Issues
To avoid this risk, make a good assessment of the condition of the property before purchasing a rental property. Property appraisers are professionals who can discover any hidden damage or problem that needs fixing; in addition, they will tell you how much your potential investment property is worth.
4) Property depreciation
In general, real estate is expected to increase in value over the years. However, this may not happen sometimes. Therefore, one of the significant risks of real estate investing is investing in a property whose value will decrease in the future. The best way to avoid depreciation is to be very careful in your research and real estate market analysis and study the economic growth in the real estate market to find a place with strong appreciation potential.
5) Negative cash problems
In real estate investing, cash flow is the amount of profit the investor makes after paying all expenses, taxes, and loan payments. The next risk with real estate investing is the possibility of generating negative rather than positive cash flows. This means that expenses, taxes, and mortgage payments are higher than rental income, so you must constantly inject cash into the system to keep the investment going.
6) Time issue. In the globalized world and investment sector, it is important to be fast day by day, follow instant investments, and examine statical data well. Therefore, rookie investors stay away from real estate investments as they want to save time. Because searching for a place, making investment analysis, conducting the purchase at a profitable rate, providing income-expenditure balance, etc. There are various investment tools and platforms for people escaping for these reasons.
Most of the above-mentioned are core problems of real estate investing and have been creating difficulties for investors almost since the start of the housing market.
With new technology developing every day, like any other industry, the real estate industry will be adapted to our age and time, with Blockchain projects like Intelly the tide seems to be turning for investors, with brand new ways of ınvesting and with access to global real estate portfolios ınvestors are able to see real estate from a completely new window, from a window of opportunity…