5 Major Risks in Real Estate Investment You Must Consider

Property investment has always been a burning topic in the world of real estate.People have shown their interest in investing large amount in residential and commercial properties. But, the fact which remains silent is that theinvestment turns to be successful, only if the buying procedure is driven out correctly. There are several risks, which might not be visible be to you, but you need to learn about them.

When it comes to investing, the real estate sector appeals investors the most. And, this is the reason why a large number of people are purchasing property as an investment nowadays. Well, it is pretty good option to invest your hard earned money. Nevertheless, like other investments this sector too involves some risks. Whether you are a first time buyer or an experienced one, it is of great importance to consider all the risk factors before you make a final purchase. Have a sneak peek at the top five risks:

Financial Risk:

A number of people take huge debts for investing in property. But, are you really aware of the fact that the use of debt magnifies the investment risk? Yes, this risk is directly proportional to the amount of debt taken. The interest rates are never constant, and this can lead to rise in the financing costs, which is surely not good for you. Both commercial and residential property investor are affected by this risk.

Liquidity Risk:

The unavailability of continuous market, i.e. when a good number of buyers and sellers are not present, it becomes difficult to sell a property. In such circumstances, one has to under-sell the property or wait for longer time, sometime up to a year for perfect price!

Management Risk:

This type of risk is based on the ability of the management. How itrespond to economic conditions, maintain the property, negotiate leases, etc. contributes to this. Not only commercial, even the residential properties are affected. You must have seen the difficulties a number of managers and owners face, due to the outdated tenant laws in India, to get hold of their property. Therefore, it is advisable for the management to go for the registered leases for residential and commercial properties.

Legislative Risk:

Another major risk involves legal regulations like tenant laws, registration procedures, restricted use of property, and several other restrictions, which are imposed by the state bodies. While investing, it is important to consider these risks too.

Environmental Risk:

What if you buy or construct a property in the areas under jurisdiction? This will surely affect the returns on your investment. Thus, you need to be a smart buyer.

Hence, if you wish to yield very good profits, you need to be aware of the aforementioned risks. Just don’t go blindly by the words of some real estate managers. Be careful, your alertness can decrease the risk dramatically!