{"id":1205,"date":"2020-09-04T12:32:06","date_gmt":"2020-09-04T12:32:06","guid":{"rendered":"http:\/\/www.unitedfinances.com\/blog\/?p=1205"},"modified":"2020-09-04T12:32:06","modified_gmt":"2020-09-04T12:32:06","slug":"no-pain-no-gain-8-real-estate-investing-risks-to-familiarize-yourself-with","status":"publish","type":"post","link":"https:\/\/www.unitedfinances.com\/blog\/no-pain-no-gain-8-real-estate-investing-risks-to-familiarize-yourself-with\/","title":{"rendered":"No Pain No Gain: 8 Real Estate Investing Risks to Familiarize Yourself With"},"content":{"rendered":"

<\/p>\n

Sometimes real estate can be a hit or miss. The industry is either doing fantastic or, other times, it might be struggling, head barely above water. But one thing is for certain: real estate is essential, and it\u2019s here to stay no matter what the industry currently reflects.<\/span><\/p>\n

That being said, if you\u2019re interested in investing in real estate, you must understand the ins and outs of the industry. We recommend starting off familiarizing yourself with the following real estate investment risks, whether you\u2019re looking to invest in commercial property<\/span><\/a> or even in a residence.<\/span><\/p>\n

<\/b>1. Asset-Level Risk<\/b><\/span><\/p>\n

Often, the overall demand for different types of housing plays a big role in whether or not a specific real estate investment is going to be risky or not. For example, even in bad economies, the demand for housing in an apartment complex is generally good. As for other types of housing, this may not always hold true.<\/span><\/p>\n

<\/b>2. Credit Risk<\/b><\/span><\/p>\n

How long and how solid of an income property has can definitely affect its value and, therefore, its overall price.<\/span><\/p>\n

<\/b>3. General Market Risk<\/b><\/span><\/p>\n

The real estate market is always going to fluctuate depending on numerous factors including current interest rates, inflation<\/span><\/a>, deflation, and other various trends that often occur in the market, some of which are difficult to control or are even inevitable.<\/span><\/p>\n

<\/b>4. Idiosyncratic Risk<\/b><\/span><\/p>\n

This has to do with the risk factor of a particular property. As an example, if a property is currently under construction or poses the danger that must be restored, it will be difficult, or even impossible, to rent out the property as it\u2019s not in a currently livable condition. In this case, this property would be considered a risk to invest in.<\/span><\/p>\n

<\/b>5. Leverage Risk<\/b><\/span><\/p>\n

How much debt is on the property you\u2019re looking to invest in? The more debt it has, the riskier it is. In the case of a high leverage risk, investors may find themselves in deep financial trouble if they take a leap of faith and invest if they don\u2019t fully understand the risk and work extra hard to ensure return on investments are greater than the property\u2019s interest payments.<\/span><\/p>\n

<\/b>6. Replacement Cost Risk<\/b><\/span><\/p>\n

There\u2019s only so much and so far a property\u2019s value can be driven up by the market before the building eventually becomes old, worn, and rugged and requires reconstruction to keep up with its competitors. What goes up must come back down eventually.<\/span><\/p>\n

<\/b>7. Structural Risk<\/b><\/span><\/p>\n

What investment financial structure (mix of debt and equity) does a property have? And what rights does it offer? Out of everyone, it\u2019s the equity holders who typically experience the most risk.<\/span><\/p>\n

<\/b>8. Liquidity Risk<\/b><\/span><\/p>\n

The number of market participants can greatly affect the investment risk of a property. Even with poorer market conditions, there are some cities (particularly, those that are more populated and\/or more wealthy) that are actively willing to participate in the real estate market.<\/span><\/p>\n

Conclusion<\/b><\/span><\/p>\n

If you truly want to succeed when investing in real estate, you must understand what the risks are. The more you know about the upsides and downsides of real estate, the better likelihood you\u2019ll adapt to its ever-changing market and, ultimately, succeed.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Sometimes real estate can be a hit or miss. The industry is either doing fantastic or, other times, it might be struggling, head barely above water. But one thing is for certain: real estate is essential, and it\u2019s here to stay no matter what the industry currently reflects. That being said, if you\u2019re interested in … <\/p>\n

Continue reading “No Pain No Gain: 8 Real Estate Investing Risks to Familiarize Yourself With”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/posts\/1205"}],"collection":[{"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/comments?post=1205"}],"version-history":[{"count":1,"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/posts\/1205\/revisions"}],"predecessor-version":[{"id":1206,"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/posts\/1205\/revisions\/1206"}],"wp:attachment":[{"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/media?parent=1205"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/categories?post=1205"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.unitedfinances.com\/blog\/wp-json\/wp\/v2\/tags?post=1205"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}