Essentials of real estate investing

Chapter 5: The main challenges facing real estate investors

There are a number of challenges that every investor has to face. You have to be prepared for all this.

Capital

One of the most common challenges faced by investors is raising capital. Real estate investments require a sizeable amount of money that is not very easy to raise for a number of people. Most people have turned to get loans so that they can make investments.

However, getting loans isn’t very easy. For instance, people with bad credit or low credit scores normally experience a number of problems getting loans. Most financiers consider them as high risks and therefore can’t lend them anything. In other instances, they may get loans but end up being charged very high-interest rates.

Self-employed investors may also have problems getting loans since most lenders prefer employed loan applicants.

Mortgage payments

When an investor purchases a property, they have to take up the mortgage payments. This is normally a big challenge during the initial stages. There is a lot of paperwork to be filed. There is also a lot of follow-ups that have to be done.

Ability to meet the set requirements for the property acquisition

For different types of properties, there are a number of requirements that have to be met by the investors.

For instance, an investor has to have experience dealing with certain property investments. If they want to invest in commercial real estate, they have to show that they have experience or adequate knowledge about such investments.

The acquisition and exchange requirements differ in different states. For instance, some states have an age limit for investors.

These requirements can pose a challenge to investors.

Taxes

One of the main challenges that investors have is the payment of taxes. For instance, if your property has appreciated in value, you will have to pay a higher tax when trying to sell it. These taxes can hinder an investor from re-investing their returns in an equally priced property.

Search for other tax benefits or concessions that you can take advantage of to give you better financial returns and cash flow.

Price appreciation

The cost of real estate properties has increased in some parts of the country and world, making it unfordable for first-time investors to secure a profitable investment grade property.

Profitability

There are some real estate investments that are not profitable. For instance, you may have rental property that only brings in enough money to cater for the expenses of the property. However, you may not be making any profits that can be re-invest in other properties. You may not also be making any profits to allow you to earn a living from your investment. This forces an investor to find an alternative job and invest in real estate only on a part-time basis.

Rise and fall of demand

One of the challenges that may affect the industry is the rise and fall of demand for real estate properties. When the economy suffers, there is unemployment. This indirectly leads to the fall in demand for houses.