It doesn’t matter what business you are in there will always be risks and property investing is no exception. There is no need to fear these risks, but you must be aware of them so that you can make smarter decisions along the way.
A lot of people enter the property investment world because they think that it is safe and guaranteed. But things can go wrong, and a lot of people that have made the wrong decisions have ended up losing money with their investments.
Prices Can Go Up And Down
If the market is good at the moment it is easy to get carried away with this and assume that it will stay that way for the foreseeable future. Many people were caught out with the crash in 2008 and ended up with properties that were worth half of what they paid for them and still haven’t recovered.
The buy to let strategy is a good one at the moment but how long will it last? Prices to rent are on the increase and the demand is high at present, but there will come a time when this flattens out because people will not be able to afford higher rents.
Property Refurbishment And Maintenance
It is a common mistake to underestimate how much an acquired property will cost to refurbish and what the ongoing running costs will be. If you are looking to rent out the property, then do your homework on this and estimate the rent income versus the property maintenance costs.
Can’t Find A Buyer Or A Tenant
The last thing that you want is for your property to sit empty for months on end because you can’t find a suitable buyer or tenants. You will end up paying each month to maintain the property while receiving no income. Get the word out everywhere that you have a property for sale or rent.
It can be very tempting at times to over invest in a property. You may believe that investing all or most of your money in a property is a good idea but if you can’t turn this around quickly then you could find yourself financially embarrassed. Remember it takes time to find a buyer or a good tenant.
Try not to over stretch yourself. Have a contingency plan to cover the time that it may take to sell or rent your property.
Always Factor In The Extras
Always consider the “extras” that are associated with buying a property and budget for these. There are estate agent fees, stamp duty, council tax, surveyor’s fees and conveyancing fees. When added up these can represent 10% of the original property cost so use this figure in your calculations.
You are in the business of making money with your property investments so be sure to factor in this 10% when considering the property for value growth. If you don’t take this into consideration you could end up only breaking even or making a small loss even if prices are rising.