Investing in real estate can help you generate an additional source of income while also increasing the value of your money. However, it is not always all about profit; there are various risks to investing in real estate depending on how you approach the market.
Real estate investing is the purchase of property to generate income rather than live in it as a primary residence. In layman’s terms, it is any land, building, infrastructure, or other tangible property that is usually immovable but transferable.
There are several risks associated with real estate investing. I have highlighted the risks associated with real estate investing as well as ways to mitigate them.
Legal Documents/Approvals (Land Search etc.):
Every aspect of our lives is filled with problems, whether legal, personal, or professional. In the same way that there may be legal issues pertaining to some aspect of your lives, there are also legal issues pertaining to Real Estate Investment for which you must exercise extreme caution.
For starters, there may be legal issues concerning property ownership. Some people can fabricate documents to present themselves as property sellers. In the same way, there are phoney property buyers. To avoid any legal snafus, make thorough inquiries before engaging in any real estate transaction. Alternatively, if you encounter any legal issues after purchasing the property, seek the advice of an experienced legal consultant to resolve your issues.
Another major issue that arises when investing in real estate is the issue of property registration. If you are having problems with the registration of your newly acquired property, the most important thing you can do is ensure that all of your documents are in proper order and then consult a lawyer who is a specialist in these matters and can provide proper guidance in handling these issues.
Furthermore, before selling or purchasing a property, ensure that it is free and clear of all debts. If you are a buyer, make sure that your property is free and clear of all debts, as this can lead to a case of cheating. Consult a suitable property lawyer to ensure that all your debts are paid and your property is free of all legal issues. He or she will assist you in resolving your financial issues. The same is true if you are a property seller. Consult a property lawyer before purchasing the property, who will check the buyers’ property papers and guide you through the entire process.
Working with Inexperienced Builders:
You will work with builders as a real estate investor. However, many property owners find it difficult to work with builders. As a real estate investor, you will face a variety of challenges with builders, including a builder delivering poor work, failing to complete a job, taking too long on a job, and going over budget.
Here are some pointers to help you avoid hiring inexperienced contractors:
1. Screen builders thoroughly.
2. Be clear on the scope of work.
3. Use licensed or bonded contractors on major projects, and take photos before, during, and after the job.
Time Factor:
“Time is of the essence.” Time is critical in many aspects of life, but especially in real estate. Because all real estate transactions are completed on a timetable, real estate agents must be adept at time management to ensure a smooth transaction process.
Purchasing a new home is not the same as going grocery shopping. In comparison to the latter, the former is much more thought-out (obviously), well-planned, and time-consuming. When a real estate agent plans any of their campaigns or strategies, this should be strictly adhered to.
When investing in real estate, one of the most important aspects of timing is after the offer has been accepted and the clients are in escrow. Escrow is typically a set period of time, usually around 30 days, during which both the buyer and seller expect the transaction to be completed.
Agents on both sides don’t always do their jobs efficiently and on time, which can cause the deal to be delayed or, worse, fall through, which can be frustrating at times. When it comes to real estate investing, time is of the essence once again!
Unprofessional Agents:
Real estate is quickly becoming the talk of the town, and everyone wants a piece of the action. It is now very simple to become a real estate agent or realtor as we like to call it. All you have to do is tell your boss you want to sell, or better yet, take a few classes, pass one or two, and you’re a real estate agent. The vast majority of real estate agents that the average consumer knows are not in the business. This is why there are so many unprofessional agents out there, and as a result, you run the risk of losing a property.
Here are a few pointers to help you spot an unprofessional agent:
To begin with, everyone has to start somewhere, and some agents may enter the real estate industry while working another job or juggling other responsibilities. However, as a seller, working with a part-time agent who is overburdened can lead to disappointment. Working with someone who isn’t fully committed to real estate is something I strongly advise against. I believe part-time agents lack the time, experience, and patience to provide the full service that clients deserve.
Also, if you’re waiting hours or days for your agent to return calls or emails, or if your questions and concerns are met with silence, it’s time to move on. The same is true for the agent who responds but has a communication style that clashes with yours. It’s probably not a good fit if he or she seems rushed, irritated, or not forthcoming during your conversations.
Other signs of an unprofessional agent include shakiness in negotiations, a pushy agenda, unfamiliarity with the market, providing misleading information, and so on. If you notice any of these red flags, it could mean that an agent will provide subpar service or is simply not the right fit.
There are several ways to avoid working with an unprofessional agent. All you have to do is get a referral from a trusted source or rule out any agents who do not have an online presence.
Derin Phillips is a financial and investment manager, CEO of Wavis Investment Ltd and an astute business leader with over 10 years of professional experience in developing and implementing business growth strategies, engineering process optimization/operational effectiveness and championing healthy financial decision making.
Source: Business Day Ng
