Property trading is one of the most daunting businesses as various risks are associated with it. Also, buying or selling a piece of land is a major decision that involves heavy investment so there’s much to consider prior taking any step. Not just property but virtually every investment poses some sort of financial risk.
The study of property market isn’t a piece of cake with all the constant fluctuation and political volatility. However, an undeniable fact is higher the investment risk, better chances of return or vice versa. Let’s check out several factors connected to property speculation and possible solution.
Like stocks, bonds, saving certificates and other liquid assets, such isn’t the case when it comes to real estate. When you’re investing in it, don’t expect conversion into cash promptly. This is why you should be very cautious and take into account every single aspect having impact on the decision. Lest you’ve disbursed in a neighborhood where high property demand persists, things can be other way around still, immediate liquidity isn’t possible.
Real Estate Topography
Real estate value usually remains under flux due to several external factors namely social, political and fiscal unsteadiness. Asides this, other demographic aspects like local codes and ordinances, real estate taxes, natural disaster, physical location and layout all pose some sort of land investment risk.
Developed & Undeveloped Land
By developed property it means a specific locality that’s civilized and rich with rental and selling options. It mostly involves leasing income, tax depreciation and other financial facts while the biggest risk is tenant not paying timely rent thus complicating the process further. Maintenance on lease property also affects the overall cost while raising risk whether it’ll further sell or not!
Meanwhile, undeveloped land couldn’t be depreciated while there’s no income from lease. Unless its geographical location is prime and investors are budding to built something, you can expect revenue but in due time. Total rate is also erratic due to external factors like state laws and others overhead costs.
High Risk Investments
High risk isn’t for everyone but only for those who can afford some money to lose if the plan backfires. If you couldn’t bear such monetary loss, heavy imbursement is absurd or steps like extracting money from your limited savings just for the sake of property investment. Things might go in favor if you’ve enough cash in-hand plus filled up bank account, this is when you can afford high risks.
The Clouded Menace
The greatest threats whether you’re involved in property or any other sort of investment is the one you couldn’t see but is lurking nearby. A few involves currency rate fluctuation, bad trades in highly leveraged account or highly potential disclaimers. Apart from this, natural disasters like flood, earthquake, landslide, tornado or fire outbreak, these are as such which couldn’t be envisaged. Besides, how would you face quandaries that aren’t even predictable until and unless you’ve some clue about it!
Apparently you must’ve set a specific budget to invest on property! If not, then take into account all the financial matters like down payment, inspection money, loan fees and other acquisitions. You might need to renovate it before moving in so do reserve some additional amount for such cases. Ten percent of purchase price usually covers one year loan payment while 20 to 35 percent is for other expense. Marcus and Millichap Capital Corporation presented this statistical inference which really helped reduce investor’s risk.
Financial Requirements for Loan
There’re plenty of financial documents required to get your loan approved including personal balance sheet, asset list, bank statement and current tax returns. Get in touch with a certified chartered accountant to solve all the complicated matters thus proving your money is ready in the bank and you can withdraw it anytime.
Don’t hold back from Real Estate Agents & Brokers
A common mistake which most investors do in this situation is avoiding real estate agents or brokers for the sake of saving some additional sum. This isn’t wise especially for someone new in this field or even for experts as an estate agent can provide better guidelines rather than following your own instincts.
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