When is real estate NOT a Good Investment?

When is it not good to invest in real estate property?

If you look at the portfolio of the top billionaires in the Philippines, you would realize that each billionaire have more real estate investments in their portfolio. This is a proof that real estate is really a good investment and it is certainly a path to riches.

Real estate as a solid investment is a given, so one might ask, is there any instance when real estate is not a good investment? Here are some instances or scenarios when real estate investment is not a good investment.

The real estate property is located in a place where the value might diminish

By default, real estate properties increase in value over time. However, there are instances when the value of the property decreases instead of increasing because the land is in a location that renders it to be unusable. For example if the land is directly above a fault line, the property is in a continuously sinking area and the like.

The property have several claims from different “owners”

One of the biggest problem a property buyer might encounter is when the real estate property bought has revealed that there are several owners to the property. Buying such property will plunge you into a long and stressful legal battle which will drain not only your finances but also your energy.

The house that you bought has a hidden defect

Sometimes hidden defects are minor and it is nothing a little touch-up couldn’t fix. That might be good however there are defects that are so huge that it renders the house to be unlivable. The sad thing about this is that such structural defects only become evident several months or years after purchase. Sometimes these defects could only be evident after extreme natural phenomenon such as rain or earthquakes. When this happens the value of the house will significantly diminish.

You are not ready to buy a real estate property

This reason is not within the characteristics of the property that you are buying, instead it is within the person. Buying a property when you are not ready in terms of mindset and financial stability will just render such to be a bad investment. If you are not ready to pay the monthly mortgage the payments will just be a financial burden for you.

How to avoid these?

Educating yourself will be the best tool for you to ensure that you will not run into this type of problems. However, if going through the learning curve is not for you, then hiring the services of a professional real estate broker should be your best choice. As real estate brokers we are guided by ethical standards and that we focus on helping you, our client, to buy the property that you want, need and within your budget. Real estate brokers are your real estate shopping buddies and not salesmen. We are also guided by the principle of “due diligence” which means it is part of our job to make sure that the documents are in order, there are not other claimants to the property, structural defects are negligible and there are no hidden defects. Finally, as real estate brokers we always make sure that you are ready to purchase a property, this is why we ask you on your monthly income, for purposes of helping you find a property that will fit your budget and will not serve as a financial burden.

Note: The Real Estate Service Act (RA 9646) requires homebuyers to buy properties from licensed real estate brokers only.

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