The challenges in the real estate industry are numerous, but so are the rewards making it a perfect investment option. Keep reading to discover what are the greatest real estate challenges and how to overcome them.
Real Estate Challenges
The investment world is riddled with obstacles, and real estate is no exception. The challenges in the real estate industry are great and the Internet age has exacerbated many of these challenges. Of course, the biggest concern in real estate the actual investment process. But in addition to many of the traditional problems in real estate, modern investors also have to think of building an online presence. And while in some ways, technology has eased an investor’s plight, it’s also created a whole new set of problems in real estate investing that did not exist before. And this is on top of the already complicated matters of real estate investing such as securing high returns or considering market conditions. However, there are reliable ways of countering real estate challenges. So, let’s see how to assess real estate investment risks and how to overcome them.
Real Estate Problems and Solutions
There are a few very important challenges and risks on the path of a real estate investor. The question is – how can they be preempted or solved? The obstacles and risks of real estate investing can be addressed with a few well-thought-out measures.
1. Market Volatility
One of the most fundamental problems in real estate is market volatility. Markets in general can be volatile, depending on current economic and global conditions. For real estate specifically, geopolitics is among the factors that can heighten the challenges in the real estate industry. Geopolitical trends can reflect poorly on economies and markets. And since even short-term real estate investments require 1-5 years to pay off, geopolitics can interfere with our investments. However, the good news is that these real estate challenges can be easily countered! Political and economic crises can be predicted in advance which gives us an advantage. At GCG Real Estate, we follow the trends, assess the risks of real estate investing in the location we’re interested in, and seek counsel from our experts to preempt the issue.
2. Negative Cash Flow
Negative cash flow can be one of the biggest problems with real estate investing. Cash flow refers to the amount of money left after all expenses like taxes and insurance are paid. Negative cash flow is when the amount coming in is lower than the amount going out. The challenges in the real estate industry are varied, but negative cash flow can be a detrimental issue because it means a loss of money. Real estate challenges like negative cash flow happen due to reasons such as low tenant rents, high vacancy rates, and flawed rental strategies. Our solution to this problem is evaluating real estate investments in advance. We assess the risks of real estate investing accurately and perfect our rental strategy. How to evaluate a real estate investment in terms of potential risks? Our experts make realistic calculations for anticipated income and expenses.
3. Increase in Liability
The challenges in the real estate industry are increased every time new regulations are introduced as they increase liability. Governments mandate new regulations to property managers as well as operators constantly. These new rules and laws can slow down the investing process. Issues like delays can result in substantial negatives for real estate investors. How to assess real estate investment risks for increased liability? In this case, evaluating real estate investments is not enough. At GCG Real Estate, we mitigate the fallout of new regulations by adding an extra percentage of desired profit to our calculations as a buffer for unforeseen events. For example, if our initial desired profit was 20%, we add 10-15% as a buffer and aim for 30-35% to mitigate any unexpected changes.
4. Limited Inventory
One of the biggest problems with real estate investing stems from the fact that inventory is limited. There are only so many active homes that can be bought. You can see how population growth can result in the demand outperforming the supply. The risks of real estate investing in limited inventory areas are great for investors who adhere strictly to a single form of strategy like fix-and-flip. But this challenge is easily mended by either investing in areas that don’t have this issue or building brand new inventory. We begin our own developments in markets that have lower quantities of active homes. We often choose to partner up with local or international developers and vendors but we always incorporate our own team to make sure we control the development process. This way, we can ensure quality and deliver results to our investors.
5. Online Presence
The most recent concern for investors is building an online presence. Out of all problems with real estate investing, this may not seem crucial to some. The challenges of the real estate industry listed above have always been there. But virtual reality adds a whole new element that can’t be ignored anymore. Of course, many aspects of the business can and even should still be handled offline as they require a hands-on approach. But having an online presence can make or break an investment business, especially if one relies on partnerships. It increases reliability in the eyes of potential partners and investors.
A Smooth Path to Profit
The investment industry is filled with real estate challenges but there are many ways to counter them. Many questions plague investors – from how to assess real estate investment risks and evaluate them to detailed calculations. But there is a path of investing that allows you to bypass these challenges – equity funds. If you would like to learn more about investment opportunities that will bring smooth results, contact us and we will guide you through the process.