6 ‘Types’ of People Who Are Prone to Losing Money in Real Estate Investments

26 August, 2024

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Unstable Finances

Real estate investment requires a substantial amount of capital upfront to purchase and own property. For existing properties with buildings or apartments, there are also maintenance and repair costs to consider. As such, those without stable finances and income should refrain from rushing into real estate investment. Over-exerting oneself financially to invest in real estate can further deteriorate one’s financial situation.

Seeking Quick Profits

Real estate investment is typically a long-term endeavor. Property values rarely skyrocket overnight unless there is a market boom. For rental properties, monthly profits may not be as high as expected, and capital recovery can take longer than anticipated. Selling property also takes time and rarely happens as quickly as trading stocks, unless the market is exceptionally vibrant.

While real estate investment can yield significant returns, it is not a guaranteed money-maker. Image: Kavi

Profits from your real estate investment will only materialize after a certain period. It is not a get-rich-quick scheme.

Debt-Averse Individuals

Few real estate investors can afford to purchase land or a house outright. Most rely on loans from friends or financial institutions. However, these loans must be manageable, and one’s finances must be able to cover the principal and interest payments. Therefore, those who dislike debt should refrain from borrowing to invest in real estate. Doing so indicates an understanding of one’s responsibility to service the debt without over-leveraging.

Unwilling to Devote Time and Effort to Asset Management

Whether you’re investing in real estate for the short or long term, it requires time and effort to manage your assets. For rental properties, you’ll need to communicate with tenants, advertise vacancies, conduct regular inspections, and resolve any issues that arise.

Real estate is not always as liquid as other investment options. Image: INC

For long-term investments, regular inspections are necessary to ensure the land or property is well-maintained and to address any encroachment issues.

Risk-Averse Investors

While real estate investment is not inherently high-risk, it is riskier than many other investment options. The real estate market can be volatile in the short term, with prices rising and falling sharply. This means that if prices drop significantly, investors who do not cut their losses may have to hold onto the property for an extended period, waiting for prices to recover or rise sufficiently to turn a profit.

Those Unwilling to Learn

Successful real estate investment requires more than just intuition or emotion. It involves learning from experience, staying abreast of market trends, and constantly updating one’s knowledge. In any investment venture, including real estate, there are always new insights to gain from books, media, and fellow investors. This is especially true for those seeking to optimize their profits and explore additional opportunities.

Hong Khanh (According to Finance)