Disclaimer: Risks Involved With Investing In Property
All investments involve a number of risks - including the direct investment into residential property. You should consider carefully any investment option (including the option of DOING NOTHING!) as to how it may effect your future. If any of the key risks these eventuate, your income might be lower than expected. There may even be none at all. In addition, the capital value of your investment could fall, stay stable for long periods, or it could increase in value.
Are you prepared for any eventuality?
The key risks involved with investing in property are outlined below:
- The property purchased may not provide the income or capital gains the asset was expected to produce.
- There is a risk that your property may, for periods of time, lie vacant and hence not generate income. Maintenance and repair costs are the investor’s responsibility and can vary, and at times be significant. Such costs are sometimes recoverable from rental bonds or under insurance policies – please choose your insurer wisely and look at the fine print carefully.
- There are many factors that affect the general property market including:-
- Increases in supply and falls in demand;
- The cyclical nature of property values;
- Increases in taxes and operating expenses;
- Overall economic conditions;
- Demographic changes;
- Changes in town planning laws;
- Casualty and condemnation losses;
- Environmental risks;
- Regulation on rents;
- Detrimental new developments in the area;
- Increases in interest rates;
- Inflation and changes to bank funding policies.
- Gearing increases the volatility in the value of your investment. In the early stages of residential investment, a significant fall in the property’s value may see balances fall to less than the total amount of borrowings, and may trigger the bank to demand a part payment to a set LVR ratio, or even the immediate repayment of the entire loan.
- Increases in interest rates often increase the cost of borrowings.
- Changes in laws or their interpretations including taxation, superannuation and corporate regulatory laws, practice and policy could have an impact on your investment.
When conducting your DUE Diligence: you should seek professional financial advice from a suitably experienced advisor! NOT all advisors understand or Know about actually investing in actual Property/ies (many Advisors are just glorified salespeiople for shares, managed funds, property trusts - but do not know about real property investing)!
(NB:- even this risk mitigation strategy includes risk as: Qualified professionals do not take responsibility for their advice sold to you, unless you can prove negligence or fraud on their part.)