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Monday, April 25, 2011

The Disadvantages of Investment in Property

There are several disadvantages for investment in the property market. It depends on the ecology of the economy of the particular country. Among them are:

Capital Requirements

These types of investment require significant amount of money. Depending on the investment, you may be required to come up with a large amount of capital as initial outlay. This factor makes it difficult for investors to purchase property and thus makes our investment is hard to liquidate.


Unpredictable Liquidity

Buying property is normally fairly easy. Sometimes it is harder to find a sound investment, but as overall there is always property for sale. The disadvantage to property investment is we never know how liquid our property asset will be. This is because the market greatly affects and is greatly affected by the overall economic situation. If the economy is in turmoil and lenders are not approving loans, it may be harder to sell a property. This requires appropriate investment decision. We don’t have to sell our property to make a return on your investment. In fact, there are several ways to earn a profit aside from selling or flipping a property. However, in the long run, investing in property market is still our best shot at a higher return on our money.

Risk

High risk normally will give high returns. More than likely we already know that in order to get big return, we must be willing to accept a certain level of risk. Like all investments, investment in property market has some associated risk. It is important that you take a moment and reflect on this fact. Property investing is not risk free. While there is potential to earn a great deal of money, there is also the chance that we will lose money.

The Art of Land lording

Managing any landlord is not an easy job. When y we invest in property, we almost always run into a situation that requires us to become personally involved with the tenant. How we handle landlordism will depend primarily on our interpersonal skills and the other individuals we interact with. Being a landlord can be time consuming and emotionally taxing.
In fact, land lording is a major deterring factor for some potential investors. It is simply too much hassle. Our feelings on this topic should be taken into consideration when looking for investment.
Changes Government Policy

Changing the government rules and regulations may also affect the property market. For example the increase of interest rate in the money market by Central Bank may increase cost of investment in the property for investors.

Management and Maintenance

Another disadvantage to invest in property is the requirement for constant maintenance. It is actually a busy business. We have to keep up on everyday living expenses such as the cost for a new roof, electrical repairs, plumbing expenses, etc. In order to get a sound return on your investment, we may need constantly enhance or upgrade our property.

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