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Beware Of These Real Estate Investment Risks



Real estate appeals to many potential investors because it is a physical asset that can be controlled while also providing diversification.

 Real estate investors who purchase property also have a tangible asset for which they can be held responsible.

When you buy real estate, you’re buying a piece of land or a piece of property.

Most real estate investors generate money through rent (which can provide a consistent revenue stream) and appreciation (as the property’s value rises).

Many enterprises come and go, but one thing remains constant: land!.

Whether the land produces a product like coffee or houses an apartment or retail space, there will always be a demand for real estate, making it an excellent investment.

You require land regardless of the type of business you do.

It’s a fantastic investment option for producing ongoing passive income, and it’s also a superb long-term investment that will grow your profit over time.

Because most people are primarily concerned with the profit they can earn from real estate, they do not look out for specific risks while investing.

 In this article we are going to look at several risks that could reduce your profit or cause you to lose money in real estate. There is an important need to understand these risks before investing in real estate.

Here Are Some Real Estate Risks To Watch Out For:

Beware Of These Real Estate Investment Risks 1

1. Choosing a bad location:

When investing in or purchasing real estate in Nigeria, location is vey important.

It is usually advisable to conduct thorough research before making a purchase.

When compared to a property in a good location, a property in a bad location has a lower potential for appreciation.

For example, a landed property near a school provides an indication of what you should do with the land.

Such land can be used for a variety of purposes, including student hostels, shopping malls, and restaurants, to name a few.

2. The Chances of Being a Victim of Property Scams

Nigeria is home to a slew of fraudulent real estate enterprises and one has to be careful before investing.

However, not all real estate investments in Nigeria are bogus; there are some legitimate ones that offer fair profits (ROI).

 While investing in real estate, you must exercise extreme caution and conduct thorough due diligence.

3. Tenants with Issues

You want to keep your investment homes occupied to reduce vacancy risk. However, this can lead to a new risk: problematic tenants.

A lousy tenant can be more expensive (and more of a headache) than having no tenant at all.

 Tenants with difficulties include individuals who:

•Fail to pay on time or not at all (which may result in a lengthy/expensive eviction process)

• Trash the property

 • Ignore their tenant responsibilities

 • Don’t disclose maintenance issues until it’s too late

 • Host extra roommates (human or animal)

While it’s hard to completely prevent the possibility of a problematic renter, you can minimize the risk by executing a thorough tenant screening process.

 Make sure every applicant has a criminal history check.

If possible check with each applicant’s former landlords for red flags such as late payments, property damage, and evictions.

It’s also a good idea to look into a prospective tenant’s work history.

Make sure they have a consistent income that will cover their rent and other living expenditures.

It’s also a good idea to pay attention to any employment history that isn’t organized.

An applicant who jumps from job to job may have difficulty paying rent.

4. The Risk Of Paying The Wrong Price For A Property

A huge danger is paying the wrong price for a property. When you overspend for a home, you risk making less money than you intended.

Paying the wrong price is one of these common risks property investors must know of before buying property.

Before buying a house, conduct some research about the property and the market price so you don’t get taken advantage of.

Many times, the price listed on the property appears to be low, and in your naivety, you buy it at that price, not realizing the property could be cheaper.

Take the time to perform the math yourself, no matter how good the bargain is, so you don’t lose money.

5. The Risk of Overpaying For Maintenance And Repairs

One of the hidden risks that property investors must be aware of before investing in real estate is the possibility of overpaying for upkeep and repairs.

To keep your home in good functioning order at all times, property repairs are essential. If you don’t maintain your property properly, it could fall into disrepair or even collapse, resulting in loss of buyers.

The cost of repair work varies depending on the type of work required, the extent of the damage, and the location of the property. Keep this cost in consideration before you decide to buy a home.

Final Thoughts

Real estate has long been regarded as a sound investment, and astute investors can benefit from passive income, high returns, diversification, and the potential to grow wealth. Real estate investing, like all other sorts of investments, can be dangerous.

Doing your due diligence and doing a thorough real estate market and rental property study will help you reduce your risks.

 Hire professionals to assess the property, screen possible tenants, and educate yourself on the real estate market.

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