The Risks of Real Estate Investing
As part of the Bigger Pockets community we're all fans of real estate investing. For many of us it's a passion. We share our knowledge and insight with new investors with the hopes of leading them on a path to success. However, we at Ali Safavi Real Estate feel it's equally important to remind people of the risks. Only knowing the good will not help you when the bad comes knocking.
It shouldn't be a surprise to anyone that mortgages are expensive. Most people need a 20% downpayment to buy a house or condo. Unlike stocks, which often have no minimum dollar amount, real estate needs a large nugget of cash. You're also signing on for a significant amount of debt, which has an interest rate attached to it. There are plenty of upsides to taking on this debt, that's why we're in this business. It's still important to remember this isn't something you can just walk away from.
With this debt and downpayment comes a very long commitment. Real estate isn't an investment you can dabble with. There needs to be a long term financial strategy. It won't always be smooth sailing. If you crumble easily under pressure, then real estate may not be your best bet.
Furthermore, and one if the hardest facts for investors to accept, the real estate market doesn't always go up. We all have relatives or friends who own property that's appreciated. Hopefully your property is also doing well. Don't let this fool you into believing that real estate is a surefire bet. No one knows what the market will do next year. The worst part about it: this is completely out of your hands. For this reason, make sure you do have some cash stashed away either in savings or other investments.