- Purchasing Planned Properties
Off the plan properties, as they are known in some parts of the investment real estate world, can be a potentially disastrous financial plan for your investment capital. Many of the reasons investors gravitate to these deals is that they seem like a can’t miss opportunity. You are given the opportunity to buy at today’s prices and sell it in the near future once the project is complete. There are several reasons these investments have a potential to lose your money.
The price you are paying today is inflated with the cost developers of the property have spent in advertising and marketing. Also, in large cities, many other developers are producing similar projects over-flooding the market with a surplus of properties that will drop the price from over supply. Finally the likelihood that you will see your investment in a timely fashion is low. These properties have a date of completion that is agreed upon, but there is still so much uncertainty that this will come to fruition. Meaning the investment may never be realized.
- Property Banking
While this is a long-term investment scheme, it is also a very real way to lose money in the present and the future. Investors are given the impression that with little capital they will be able to bypass years of saving and immediately purchase properties that will be of value in the future. Quite often, these properties are of no value and leave investors holding land that they cannot sell off.
- Buying Less Choice Properties
When the market is hot, investors are desperate to be involved in the new hot suburb or land development. Investors are hoping to piggyback on the buzz surrounding a hot area, that they buy subprime properties in outlying areas on the fringe of prime developments. Properties that have issues like limited access and noisy surrounding will be hard to unload regardless of proximity to other successful deals.
Making a profit on a real estate investment has a lot to do with choosing the correct property. It is not luck, but careful planning and research. There is no quick fix that will allow you to skip to the end of your investment period.