Before you jump into investing in property, make sure you understand the risks

Julie Brownlee, Fsp Invest, 10 Oct. 2014

Tags: investing in property, property, property investments, problems investing in property,



Investing in property can be a great opportunity to get your money working for you.

But buying a property to rent out isn’t without risks. There are several downsides that you need to understand.

So what are the downsides to property investment?

Let’s take a closer look…



Three of the main disadvantages of investing in property


When weighing up an investment opportunity, you need to look at the good and the bad. This applies to investing in property too.

Investing in property is very different from investing in shares. For instance, you can’t sell a property immediately like you can your shares.

But that’s not the only problem you could face owning an investment property. Here are the main ones you should consider…


Investing in property problem #1: Voids


Voids are periods when your investment property is empty. You’ll find your property empty either when you’re looking for a new tenant, or when you’re getting work done on the it.

During void periods, you won’t receive an income, but you’ll still have your ‘normal’ outgoing payments to cover. This includes things like your bond repayments, insurance and maintenance charges.


Investing in property problem #2: Management


Unlike shares, property needs some looking after.

Unless you have suitable experience and the time to dedicate to the job, it makes sense to employ professionals to manage it for you.

Yes this does come at a cost, but it may be worth the money. And with such a substantial investment at stake, it may pay off to have this experience and assistance.


Investing in property problem #3: Bad tenants


There’s always a chance of having a bad tenant in your property. Someone like this may not pay their rent, damage your property or not move out when they should.

This type of scenario stresses the importance of having a solid tenancy agreement in place. A property management company can help you with this.

If you do have a good tenancy agreement in place, you shouldn’t have a problem evicting them from the property. But the legal process can be slow and chances are you won’t recoup any monies due to you from overdue rent.

So there you have it, the risks you need to understand before investing in property.

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