Risk In Real Estate – Is Real Estate Investment Indeed Risky?
The term realty or real estate means building or land. Since generations man is known to have desired owning a piece of land for personal use and this is valid even today.
Purchasing land is thought to be a worthwhile investment by most and there are many who make a living out of buying and selling land. Basically it involves buying property, making some changes or additions to that and selling it after a while to book profit in the process. But buying land is not easy for an average man, mainly due lack of funds and scarcity of land at preferred places.
Investing money in anticipation of getting returns is always associated with risks. Even when you invest in stocks and shares you are taking some risk. What distinguishes investment in real estate from traditional investments is the amount of money involved. It needs a lot of money and the more the money, the greater is the risk.
Considering the information and data posted on the Internet by some of the renowned financial experts returns from investment in real estate are not very lucrative, yet time and again investments in real estate are proven to yield substantial profits. For investment in real estate to be profitable one need to take steps that reduce risks. Should you be thinking on the lines of making investment in real estate study these features before taking a plunge to reduce associated risks!
Cash and liquidity:
At the outset you need to assess if you can spare cash for buying property. Well, most won’t have enough cash for buying property without borrowing from other sources. Of course, you can get 100% finance from financiers, but calculate the expense of raising that finance. Include interest, service charges and finishing costs in your calculations. You must have personal finance for making down payment to the tune of at least 10-20 percent. It reduces you overall debt and gets you better returns.
Liquidity in this case is not feasible. So, keep some money reserved for any financial eventuality in the family.
There are many factors that can influence the value of your property, of which location is an important one. Look for a reasonably decent locality populated by working class. Ensure that the area is not prone to natural disasters.
Ready-to move-in- property:
The benefit of investing in such property is not difficult to guess. You may live there for a couple of years and rent it out subsequently. The risk in renting property depends on the kind of client you select. However, most states have laws in place to take care of the interest of landlords who rent their property.
Unless you can stay invested for long, it may be a risky venture for you. You can’t rent it out or sell it profitably. Location is all the more significant in this case. It may take inordinately long time to develop, meaning once again that you should be prepared to stay invested.
Is real estate investment indeed risky?