People will often say that property is one of the best places to park your money. A house will always be there, they tell you, and people will ALWAYS need homes.
But when you look at the data, you soon see that owning property isn’t risk-free. If it were, then there would be no such thing as homeowner’s insurance.
It turns out that investing in real estate is riskier than most people think – something you need to be aware of before you take the plunge and put a deposit down.
Here’s why buying a property IS NOT a risk-free investment.
House Prices Can Fall As Well As Rise
Despite what the pundits might say about the property market, house prices can fall as well as rise. Over the last twenty years, we’ve been lucky. House prices have gone up in value continually over time, outpacing increases in wages. That trend, however, could come to an end at any point. All it takes is for global interest rates to rise and mortgage costs to go up, and it’s game over for the market. Prices will fall back to their historical trend, and that will be the end of that.
Flooding Can Damage Your Property
With rising sea levels and increased rainfall, the risk of water wrecking your real estate investment portfolio is higher than ever before. Companies for home flooding have never seen so much business for their services.
In the past, a lot of builders constructed properties on floodplains. In a world of normal levels of rainfall, many believed that as the sensible thing to do. Flooding was a remote possibility. With increased urbanization, surface run-off, and deforestation, that’s all changed. Flooding is now an issue up and down the country, with several instances already this year.
Flooding doesn’t just wreck the furniture. It can get into the walls and foundations of a property. Once it sets in, you need a professional to remove it. If you don’t, you inevitably wind up with patches of black mold everywhere – and you certainly don’t want that!
Your Maintenance Bills Could Go Through The Roof
Average property prices continue to rise, but homes themselves are depreciating assets.
Because they require maintenance. If you didn’t clean out the gutter, replenish the exterior paintwork or replace the boiler, your house would soon fall into a state of disrepair and start losing value. Properties need upkeep to maintain their value.
For most homes, upkeep tends to average around 1 percent of the value of the home per year. So if you have a $200,000 property, expect to spend about $2,000 on maintenance. Some years will be higher than others.
Some property owners, however, can get unlucky for one reason or another, and their maintenance bills can shoot through the roof.
The biggest culprit is asbestos. Removing the lung disease-causing material is expensive. The second most significant issue is dodgy plumbing. Cracked pipes that burst can set you back thousands of dollars in repair bills.