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5 Types Of the Worst Real Estate Investments That You Should Avoid
Posted: Nov 12, 2013
Are you looking to invest in real estate? Anybody would invest in real estate with an intention of getting maximum profits at minimum risks. All properties are not equal. If you will ask any real estate agent, he will not tell you about the properties that are at risk of producing low incomes. To produce positive cash flow from the property that you are investing in, it is important to know which properties that can yield the negative cash flow. Here come few suggestions that need giving another thought when you plan to invest your hard earned money -
- Foreign real estate - If you are planning to invest in foreign real estate, then you must re-think on your decision. Here is the reason why. Foreign properties are at high risks. Because the foreign countries have different laws that govern the realty market. Fluctuating currencies of the foreign countries adds more risk of getting negative cash flows.
- Development lands - Lands that require development that subjected to higher risks. You will have to put extra money on the construction or renovation of the property without being sure that you will be getting positive cash flows in future. Moreover these properties are more subjected to market price risks and similar other issues. Investing in development lands is fit for very rich people who can take the risk of never seeing their wealth again.
- Hotels and condos - One cannot predict the capability of cash flows, sales prices or rental values from these investments. It represents the worst case of investment. They bring along themselves the risk of reselling.
- Vacation rental or Beach properties - If you buy a vacation rental or a beach property, it will take probably more than 20 years when you will dime your first positive cash flow. And that is just not a good reason to invest your hard earned money. You should invest in a property that brings profits from day one.
- Properties with no rental income - People invest in realty with the mindset that the properties will grow in value. Investing in real estate properties comes with an opportunity. Properties that do not produce any rental income are also among worst investments. As the realty market is dynamic in nature. One cannot predict if a piece of property was good in value in past will continue to be good in future.
When investing in realty does not come up to the mark, money invested into it is lost behind the scenes. To bring long term positive results, one must carefully invest into it. Real Estate market is all about luck, knowledge and up-to-date information.
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