Like any investment there is no return without accepting a level of risk. The most successful investors are those that are able to recognise risks and reduce the effects of these risk before they invest. They are playing the investment game with the deck stacked in their favour.
Property Investment is the same. There are risks that every investor should be aware of , so that their effects can be mitigated or reduced. Lets start with the bigger, harder to mitigate risks.
In simple terms this refers to a situation where the market as a whole falls in value. There is very little an individual investor can do in this situation.
However there are other aspects of Market risk. this is what we refer to as the “market cycle.” We know that property markets tend to move in distinct cycles. Generally we refer to the market as either slowing, flat, falling, recovering, rising and booming.
A canny investor will form a view of where the property market is in it cycle and identify what the likely next move will be in price. for example when a market id entering a slowing stage then the likelihood of strong short term growth is unlikely unless events change.
These factors and risks can influence both the investor and the financial institutions used for finance resulting in sometimes unforseen additional costs to counter some risks such as mortgage insurance, landlord insurance and even income protection insurance.
The most obvious point to note when evaluating these risks is to do your homework and to get more than one professional opinion, as in most cases that one professional will have conflicting interests as they will be the real estate agent selling the property.