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Issue #4 · created by Wav


Main risks of the real estate market

When we talk about investment most people think of a business or property income originating permanent, and that the investments in real estate have always been favorites of investors. This does not mean that they are completely free from undesirable hazards. Let's see what the main risks of the real estate market are.

Fraud in unrealized works

In the first place, we can name the problems derived from the frauds committed by promoters who sell their projects on plans; that is, before its construction.

This is a delicate and frequent issue, because although it is very attractive to acquire a property at this stage due to its much lower cost, carrying out civil works is a complex task in which many things can go wrong.

Financing problems, conflict with the unions and lack of adequate supervision are factors that can cause delays, delays and even prolonged stoppages that produce a collapse in the construction, defrauding their investors.

Even promoters with very good intentions can fall into this problem. That is why, if we are evaluating embarking on a project for which we only have the plans in hand, it will be highly recommended to review the background of the developer, the construction company and even who is the responsible engineer and what their professional credentials are.

It is also worth knowing in detail what the financing plan is and where the funds will come from. Familiarizing yourself with the deadlines that are foreseen and the respective progress scheduled will be important to quickly detect significant delays or non-compliances.

Viewing the logs thoroughly avoids later problems

Another crucial moment that can carry risks occurs when the sale protocol is finalized. First of all, you have to be very sure that the person who claims to be the owner has full ownership of the property and has the power to dispose of it without any restriction.

For this, there are records where it can be verified that all the data is correct, that it is also the property that interests us and that there are no limitations to carry out the operation. Special attention must be paid that the property is not subject to seizure or any kind of litigation.

Another issue to address - and that may sound obvious - is the condition of the property. One or more visits to it can convince us to acquire it, but its structures may have flaws that are not perceptible to the naked eye.

This is resolved through an appraisal that is carried out by duly qualified personnel, taking into account the characteristics of the land, its location and its structural condition, up to the reasonable market price.

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The appraisal should avoid subsequent headaches for investors, as well as produce a fair reference regarding the price to pay for the real estate we are considering acquiring.

Accidents happen

From then on we can mention one more risk that is clearly manageable. There is always the possibility that a natural disaster, an accident or an unforeseen situation destroys the home or the premises in which we invest our capital.

It is precisely to correct this type of incident that can occur at any time that insurance exists. For this reason, from the first moment of considering the investment, we must add to the possible capital to disburse the cost of a policy that covers all these circumstances that guarantees that we will at least recover the present value of the property.

We always think that accidents happen to others, and sometimes we do not pay attention to these elementary forecasts, which, incidentally, are generally of low economic impact. When the tragedy arises then the wailing begins.

How many times have we heard of a fire or a flood that destroyed a home or a commercial sector? There is no justification for taking unnecessary risks due to carelessness or to save a small amount of money, without which we leave our investment to chance.

In general, real estate investments are safe; however, we cannot ignore that when processing them we must observe the minimum standards dictated by common sense to effectively protect our heritage and avoid surprises.


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PeterMike/Paper#4

Assignee: Wav

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