Over the past decade, real estate has been consistently regarded as the most popular investment choice for Americans. According to a public poll conducted by Gallup, real estate maintains the top spot over stocks. 35% of Americans have listed real estate as their top investing choice, compared to 26% for stocks. Although it’s arguably the best investment choice, that doesn’t mean it’s for everybody. Many people wonder if real estate investment risks are worth taking. Just like any other investment, property owners can lose money.
Despite the COVID-19 pandemic, the real estate industry has continued to perform well, reaching all-time highs in various regions. However, many investors forgot that everything going up must eventually come down. They believed that the market would only increase, confident that if they bought a property now, they would sell it for a profit later. Although real estate values typically do rise over time, the market can be unpredictable. Supply and demand, government policies, interest rates, and demographics can affect real estate prices. Investors should thoroughly research the market and monitor their holdings to minimize the risk of landing on the wrong side of the trend.
Cash Flow
The cash flows that real estate investors receive from their investments are what remains after paying all of their expenses, taxes, and mortgage payments. A negative cash flow can occur when the amount of money coming in is less than the amount going out. Common factors that can negatively affect a real estate investment are a high vacancy rate, a lack of proper maintenance, and high financing costs.
Location
One of the most important factors that investors should consider when it comes to buying real estate is the location. Since you can’t move a property to a more desirable area, you must consider all aspects of a location when making a decision, as it can influence the type of properties in high demand, the rental rates, and the potential appreciation.
Availability of Tenants
One of the essential factors that real estate investors should consider when it comes to buying properties is the availability of qualified tenants. Unfortunately, there’s always a risk of high vacancy rates, which can affect the profitability of property investment. To lower your vacancy risk, consider rental rates within the market range. To attract potential tenants, you should also market and promote your property in a way that reaches your intended audience. As soon as a tenant gives notice that they’re moving out, start looking for new tenants. In addition to being able to find new tenants, you should also make sure that the property is well-maintained and clean. Having a good reputation can help attract quality tenants and keep them happy.