The property business is indeed a promising business with very large profits. The growth in the number of residents and new families are the main factors for the increasing number of players in the property business. However, even though it looks attractive, of course there is a risk of property investment the same as the risk of investing in stocks or other investments. Recognize the risks of property investment before you start your business in order to minimize the risks that may arise. The risk of property investment cannot be separated from the business opportunity, where there is an opportunity there is also a risk. On this occasion, we will describe what are the risks of property investment. So those of you who are new to running a property business or just starting a property business can find out more about this. The following are the risks of investing in property that you should know.
1. Big Capital
One of the earliest property investment risks is having to spend a large amount of capital. Property is indeed different from other investment products such as stock investment, gold investment or mutual fund investment, which can start with a small value. In the property business, generally, the money spent to buy the property is relatively large, especially since land prices tend to increase every year. The capital issued must be recorded in the books so that it is neat and the business can develop. Use third party applications or services if necessary to do so. See here to find out about other party applications and services in tidying up the books.
2. Uncertainty in Market Conditions
Although the need for a place to live, either a house or an apartment, continues to increase, it is not a guarantee that property products will definitely be sold. This is because the purchasing power of property is influenced by people’s economic factors, tax factors and government policies. In the property industry, there are cycles of ups and downs and this must be known by property businesses to reduce the risk of property investment. And when the Covid-19 pandemic condition is like today, many investments have decreased growth, including investment in property.
3. Not Liquid
Property is also not an easy liquid investment. The point is that if we want to sell property, it takes an uncertain time, it can be fast or long to sell. So it takes time for us to become property, cash is cash, even in the midst of an economic situation it takes longer time to sell property. This is also what distinguishes investment in property from investing in gold or very liquid stocks, therefore these investments are widely sold on online investment platforms. Because currently investors are more inclined to liquid investments.
4. Maintenance Load
Another thing that must be considered as a property investment risk is that the maintenance burden is the responsibility of the property owner. The maintenance costs include painting walls, leaking roofs or bathrooms, cracking walls and cutting grass. The maintenance expense charged to property owners is mostly because the property is not occupied, not rented or sold. This must be calculated as property investment risk before you buy the property.
5. Building Depreciation
Another property investment risk is the depreciation of the building. This is more experienced by residential properties than apartments. This is one of the advantages of apartment investment. The drawback is that after 20 years of occupancy, the apartment must take care of the extension of the Right to Build, because the apartment certificate is not a Certificate of Ownership. Building depreciation expense is a property investment risk that must be borne by the owner. In the business world, depreciation expense must be recorded because it affects the valuation of the company’s assets. Do not forget to record the depreciation of your property building.