Real Estate - 5 Risks in Real Estate Investment
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Investing in real estate is not 100% risk free. When you involve in real estate, please pay attention on the 7 risks below:
Risk of vacant room
If you are renting out your property, then you may encounter the risk of vacant room. In most cases, people rent your property is a “shorterm activityâ€Â, however you rent out your house is a “longterm activityâ€Â. So in this process, it is high possibility that your tenant will keep on changing. So in between, you may encounter the risk of vacant room. The most direct effect is your intending profit will drop. That’s not all, you also have to take care all the expenses of your property and you will lost a lot of money if you don’t mange it well
Risk of tax policy changing
If there are any policy changing of government, investors can not calculate the returns and risk based on the old formula. Investor should re-plan their strategy according to the condition from time to time.
Risk of rental fluctuation
It is normal that rental will always change. This fluctuation will be more obvious for high value property. There are a lot of factors can affect the rental. It can be real estate market itself, economy, development, government policy and other minor factors.
The possibility of renovation
There are people say that, if you can maintain well, your first time fitment can easily last for another 10 years. However, this will not work if other people stay in your property instead of you. So you must plan properly and include the expenses for renovation after several years. Of course, renovation will improve the value of your property and so is your rental.
Risk of mortgage
One of the benefits of real estate investment is we can leverage on bank. We easily own a property just by paying a low down payment and get a mortgage from bank. No matter what mortgage plan you choose, the mortgage interest rate is fluctuating and always change according to the market. So you will loose money if one day your rental cannot cover the mortgage.
If you know the other risks invest in real estate other than 5 above, you are welcomed to share it here.
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4 Responses to “Real Estate - 5 Risks in Real Estate Investment”
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comment 1 :There is mass exuberance in stock, commodity and real estate market. This mass Euphoria may end up ina bust. Money is flowing across the globe. Considering the growth of credit in last 2 year, bubble will bust in next 3 to 4 months. I expect 2007 will give us nice buying points once again.
Author wealth advisor. I suggest investment in Real-Estate and invest rental income in stock market.
Lazypig
Real Estate Advice Roundup…
From investing to mortgages there are some good real estate advice articles out on the net this week. Here are a few:
Pacesetter Mortgage Blog has excellent advice for those behind on their mortgage - Beware of Mortgage “Rescue” Firms and a…
The difference between what you pay and sell the property for is the amount of profit, after subtracting costs of ownership. Rental properties may also have a positive cash flow component if the total rent is greater than the expenses of owning the property.
I don know but why i don find such informative and profitable blogs so often,I suspect blogging world is becoming so small that we cant find such lucrative blogs like this one.