Real Estate Investment: What Causes It to Fail?
Real estate investment is always tempting. Property is one of the most profitable assets, especially in big cities. Buying a property means getting something real. Properties are also important to maintain your financial stability, because as everyone already knows, the value in property industry is always increasing. Therefore, there’s a lot of people are choosing property to be made their investment. Even so, real estate investment is not a gold mine for everyday. Sometimes it can backfires you, if you do it in a hurry-scurry.
Property is a promising. It has great values. But, of course, it has its own risks too, and you have to face them. After all, with high risks come high returns. These risks can be caused by many factors, such as location, access for transportation, property status, or any other else.
To manage the risks, maybe you can consider the explanation below to predict if a property is going to give you disasters or profits.
BUILT in DISASTER-PRONE LOCATION
This is the main concern for most of the people in choosing properties. Whether to make it as investment or living place, safe and convenient location determines the value of the property. As for the investment, it could determines the number of people who attracted to be a tenant at your property.
If your property asset is located in a disaster-prone location, such as floods, earthquakes, landslides, etc., the value of your property will automatically drop because the lack of interest. It’ll be a huge loss for your real estate investment plan. So, make sure you choose a property that is built in non disaster-prone location.
LIMITED ACCESS for TRANSPORTATION
Property that is built in a remote location, with limited access and inadequate environment could be a big challenge. It has high rates of potential risks. It’s going to be difficult for you to market a property in such location. If you want to make an investment in such location, you should consider first the projections in the next few years.
PROPERTY’S STATUS IS NOT CLEAR
As mentioned earlier, real estate investment is a big investment. For that reason, avoid investing in a property that is in a controversial (dispute) status. It will be fatal for you in the future. You could spend more money on courts, notaries, lawyers, administrations, and any others related to its legality.
It’s a good idea to make sure first the status of the property that you’re going to invest–is it already in accordance with the government regulations or not.
REAL ESTATE INVESTMENT in A BUBBLE AREA
This term represents the soaring housing prices due to increased demand and speculation. This analogues with an enlarged air bubble. At some point, the demand’s graph will stay at the same level (stagnate), because of the increasing number of properties available in some places. Along with this, of course the property prices will drop, as what has happened in the United States around 2006-2009.
Having property assets in the area that is affected by this bubble will give you result in losses, because its value will always be decrease, even would experience “free fall”. That’s why, you should always remember to find out more information about the location of your property.
PROPERTY DEVELOPER IS NOT COMPETENT
Developer’s reputation is also one of the most important things you should be aware of. A less competent developer can leave your property abandoned. There will be delay in project progression’s time, under-expectation specifications, and other mistakes that might cause you loss. In other words, a good property also depends on whether its developer is reliable or not. Competent developers must have high quality resources and also experienced in property projects, so that they would have a detailed calculation for your property.
Now, those are the things you should consider first if you want to avoid any failure in property investment. Be aware, make sure your preparations are ready enough, and detailed. After all, who want to fail, right?