Whether you’re a beginner investor or a seasoned expert, you must keep in mind what can go wrong to have any hope of long-term success. Here are a few issues to be aware of and prepare for.
It takes a long time to transact properties
Unlike shares where you can cash out anytime you like, property takes longer to sell. If you need cash in a hurry, you could forced to sell at a much lower price than you’re hoping for.
It’s expensive to get in and out of property
Unlike shares and other asset classes, you need to spend tens of thousands of dollars to pay for the entry cost of buying a property and then several tens of thousands more when you exit.
Cash flow crunch if your property becomes vacant
If your tenant leaves and you don’t find immediate replacement, you could face cash flow squeeze that could lead to default or forced sales.
Interest rate hike
When interest rate increases, your repayments also increases and this could put a strain on your cash flow.
You could buy the wrong property
If you didn’t do enough due diligence and bought the ‘wrong’ property in the wrong area at the wrong time, you could face years of slow or no growth or worst, no income due to high vacancy in the area.
You could lose your job and unable to meet your mortgage repayments
If the economy falters and you lose your job, you could also end up losing your home or investment.
Before you take the plunge into property investing there are many things you need consider. This includes understanding the risks involved in investing in property as well as what you want to achieve. Ask yourself the following questions:
- Are you sure property is the best way to invest your money?
- Do you understand the risks of investing in property?
- Are you ready to become an investor – financially and emotionally?
- Do you know what you want to achieve?
- Do you know how to achieve your goal?
- Are your financials in order?
- Do you know how to manage your budget once you purchase the property?
- Do you have people to support you if things get rough?
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