So you’ve heard that real estate is one of the smartest areas in which you can invest. You’ve decided to take the plunge. You’re looking at some property in your area, or even overseas, and you’re feeling confident that you’re making the right move. How can this possibly go wrong?
If you’re expecting me to turn round and tell you that real estate isn’t a good investment, that’s not going to happen. If you make the right moves, then you could be in for some great success. But because the wealth to be found in real estate is so well-publicized, people often get a little too cocky. They forget that, just like any other type of investment, real estate carries several risks.
Here are some of the most prominent risks when investing in real estate.
Getting financing from a bank
Many people turn to the bank when they need a loan to start investing in real estate. And that’s understandable. After all, someone’s bank is often the first thing they think of when they decide they need a loan. And with the necessary capital to start this venture, don’t most people need some kind of loan?
The problem with loans from banks is that the small print is usually not very friendly to real estate investment. At all. Most banks will have an uncomfortable amount of the property asset you’ve purchased. They may even be entitled to some of the rent revenue. If possible, find other means of funding.
Inadequate home repairs or inspections
When you buy a property, you’re generally going to be getting it is the exact condition in which it’s presented to you. For many, that sounds like a great thing. And, in a way, it is! But the problem here is that the property may wear its problems on its sleeves, so to speak. Structural damage and weakness, termites, leaky roofs and underground problems… these are just of the severe problems that can be hiding away in a building!
You need to get as thorough inspection of the property as you possibly can. Plumbing, electricity and general structure should all be reviewed by experts. If you got problems with faulty wiring, concrete strength or the pipe lining materials, you need to know.
At first, this sounds like an odd one to bring up! But, as many investors have found out (the hard way), criminals are a worry when purchasing a vacant property. Buildings that aren’t owned by anyone (or in foreclosure) are often the target of squatters. There’s the possibility of having to deal with squatters when you arrange to purchase a property.
Another thing to worry about comes after the purchase of the property. Once you’ve put several household goods in there, it can become a target for thieves. Let’s say you’ve put in several white goods, some furniture, maybe even a TV. All to make the place look more attractive and convenient to a prospective buyer, right? It’s a common practice. But once you’ve put goods in a vacant property, you risk burglars taking the opportunity of that vacancy to take what they please. So make sure you’ve installed adequate security measures!
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