How Does One Reduce the Risk When Investing In Property?

Last updated 26/07/2018

Risk, Invest, Rent

It is still said that putting your money into bricks and mortar is one of the safest investments. However, it still comes with risk.

How does one reduce the risk when investing in property?

The Right Price

It can be easy to get swept along with the theatre of buying a house and pay over the odds for it. Paying too much for your house will put your profit margin at risk.

To reduce the risk when investing in property, do you research on the market, what are similar properties going for? What is the rental demand? You could have an absolute bargain of a house but you cannot get tenants do it sits vacant and looses you money.

Timing

The property market can be unpredictable. Take your time to step back and re evaluate if now is the right time to invest in a property.

There is no sure fire guarantee that you will make a profit for it at the end when you come to sell it on.

Time it right to buy and to sell, if you choose a bad location and the market is volatile you could end up with a negative cash flow.

To reduce the risk when investing in property pay due diligence on the market itself as well as the area of the property.

Rent Arrears

It is a landlord’s worst nightmare, you’ve invested in a property, you’ve got the tenant but they can’t pay rent.

You can reduce the risk when investing in property and ensure the relevant checks are completed and where possible think about entrusting the tenant check to a third party such as a letting agent.

You can also look into a rent guarantee policy or if your landlord insurance covers unpaid rent as well to reduce the risk when investing in property.

Rising Interest Rates

To help reduce the risks when investing in property of rising inflation rates you should keep track of the market and any changes in the economy.

Ensure that you have a small margin between your mortgage repayments and the rent payments to cover you in the event this comes to fruition.

Maintenance Costs

Investing in property for most is a long term arrangement. The upkeep of the house and appliances needs to be factored into your overall budget.

To reduce the risk when investing in property leaving yourself out of pocket you should invest in long term quality appliances as well as making sure you have a survey report and home buyers report completed on the property as well.

They may be a prolonged period of months where you do not see any maintenance costs but they could then all come at once. Keep aside an emergency fund just in case you do need to fall back on it.

Liquidity

For those than need cash quickly you may find that property investment is more risky than if you are in it for the long term.

To reduce the risk when investing in property of leaving yourself in a financial situation where you cannot pay the mortgage back and with most liquidity being tied up in the house have a clear goal of what you want to achieve and in what time frame.

Another way to increase your cash flow and to reduce the financial risk is to have a diverse portfolio of different types of property in different areas.

For more property investment information have a look at the Jaevee Blog.

The Revolutionary Equity Investment Platform

We would advise you to seek independent financial advice before investing. Capital at risk when investing in property.

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