Real Estate is one of the sectors that is very dynamic and investors have to be smart enough to go around the challenges that are frequently found here.
Even though real estate has many benefits such as being a low-risk portfolio vehicle to building long-term wealth, it also has many challenges. New investors have to be aware of these challenges so that they know how to handle them in the best way that will ensure that their capital is preserved as well as enjoy capital gain in the long run.
As most would agree, it is better to understand the problem first before figuring out the solution. Therefore, it is for this reason that we have interviewed the most successful real estate experts and below are what they have found to be the challenges investors face and how they can maneuver them.
The demand for real estate properties is higher than the available property listed for sale. According to housing data across different countries, housing is a major problem, especially in urban areas.
The best way to handle this problem according to Reuben Kimani, CEO Username Investment Limited, is by considering buying plots in the suburb of a city and build property either as your primary residence or build and sell to other investors.
Alternatively, he advises investors to consider looking for real estate brokers who are well connected in the market as those usually have offline properties.
With the current pandemic of Covid-19 ravaging the world economy, most tenants have not been able to pay rent putting real estate investors at a high level of income uncertainty.
The remedy for this scenario is that investors should have a well-standardized way of screening tenants when they are coming in. This will reduce the default rate of paying rent.
Low Rental, Occupancy Rates
One big challenge that investors face after a property is lacking tenants to come to occupy the house. This is often the case when the property has extra luxury features that make its rent expensive.
The solution to this is to ensure that the property that you buy as an investor be in a very strategic location and understand your target market before buying the property.
Quickly Securing Funding
One challenge that investors often have after identifying the property to purchase is accessing a loan from financial institutions. The process of accessing a loan is often long and time-consuming.
The mitigation to this is usually to have applied for the loan long before you start making an offer to the property seller.
Also, if the property you want to buy is expensive, you can consider buying a plot in a very strategic location and then you start developing your property.
Unexpected Property Maintenance
Sometimes investors are faced with unprecedented calamities on their newly purchased properties that are beyond their control especially floods, earthquakes among others.
The best approach to ensuring that you don’t become a victim of these is by doing enough research to ensure that you are buying a property that is not in areas that are often affected by floods or experience earth quakes and other natural calamities.
In addition, the property that you are buying should have been properly inspected by professional architecture.