If you’re thinking to invest in real estate, it is important to look into the risk involved as well. Once you are able to look into the risk which is involved in real estate, it would become easier for you to take a call. Owing to this very reason, it is important for you to understand the risk involved and thereafter take a balanced decision. You do not just have to get attracted by the returns which are provided by real estate. You have to be also realistic when it comes to the risk. We would today share with you 3 different type of risks revolving around real estate.
1. Long holding time:
The number 1 risk which most of the people do not acknowledge is the low holding time. Not each and every market is liquid. Owing to this very reason, in some of the markets you might have to wait for one year to 2 years in order to liquidate your real estate property. Only when you’re ready to wait for this much period of time, you should go ahead and think about in investing in the real estate property.
If you’re thinking that the real estate prices would always go up, you are wrong. You need to keep in mind that there would always be volatility in real estate prices as well. This is one of the main reasons why you have to always think about investing in real estate only when you are planning for the longer term. When you are planning for the longer term, it would indeed become easier for you to handle that volatility. Moreover, you must have the courage to handle the volatility. If you panic during the volatility, you would not be able to invest in the real estate property. This is the reason why you should not panic when you are investing in real estate.
3. Large leverage:
In most of the cases, when you’re thinking of investing in real estate, you would be opting for a large leverage. You need to understand that leverage can not only help you in making a great amount of money but if things do not go your way, it can make you lose a lot of money as well. Thus you need to understand the risk. Only once you understand the leverage, it would be good enough for you to go ahead and take that call. Otherwise, it is a much better idea to 1st to save a significant amount of money and thereafter think about approaching the sellers .
You need to keep in mind that if you do not repay the loans which you have taken, your credit score would get impacted. Moreover, the property would also get foreclosed. Therefore, you would not be able to earn any kind of return from the property as well.
Thus, when you’re thinking about becoming one of the buyers in real estate, it is important to understand the risk and thereafter you have to take a call.