There’s nothing like a risk-free investment, but until a not that long time ago, the real estate market was considered a risk-free strategy.
Alongside commercial and institutional investors, the Real estate was very popular with regular people who could buy properties when they could afford them. The rationale behind this was simple: the obstacles to entry are minimal as you can earn profits by selling the property right after you purchase it, and there is a possibility that the property’s value could rise over the future. But, this confidence was shaken up in the last year. However, the real estate market didn’t suffer the slap that everyone was expecting, at least not in the UK and a number of European countries, specific real estate sub-sectors were struggling. For instance, the hospitality sector was severely affected by the pandemic and the numerous travel restrictions. In the same way, many retail locations were left abandoned while sellers relocated to the internet. Office buildings are also facing an uncertain future because numerous companies are looking into the possibility of remote work for the long term and do not require an infrastructure of the kind previously used.
In this case, you might be inclined to drop real estate investments and move toward other industries. But, the risks are manageable and, if you already have a property, you can take steps to ensure a steady cash flow.
You already have a property.
If you bought a property some time ago, you could be concerned that the property could be losing funds. In the beginning, it’s crucial to be in a calm state, do your research and make informed choices. Doing too much to believe rumours and assumptions can be counterproductive, and it’s a fact that emotional reactions are one of the best ways to undermine your investment plan. Before making any decision consult an analyst who will tell whether your property has been affected, to what degree and for what reason. If your property is indeed involved and is beginning to struggle with cash flow issues, you may think about ways to transfer risk.
For instance, you could look into the method of value-added investors like Yakir Gabay. Around town (10 per cent owned by Aviso that is managed by Yakir Gabay), managed to generate more than EUR4 billion sales throughout Germany and the UK during the pandemic. While seeing your home have low cash flow could be worrying, many homes can be improved or reused until the economy improves. For instance, office space could be transformed to become a workspace shared for freelancers. Larger commercial spaces could be turned into warehouses, which is where there is increasing demand. It is also important to note that you could also renovate existing properties to attract prospective tenants as Aroundtown did.
If you own a property in a field that has been negatively affected by economic events, It is crucial to take a proactive approach and come up with alternatives before the situation becomes too much. The faster you can adapt and shift the risk, the better you can reduce the damage.
If you’re planning to invest
If you don’t currently own an investment property but are considering making an investment soon, you might be confused as many of the things that fall into the low-risk category are now open to discussion. For instance, the use of office space or luxurious apartments in the city could not be an effective strategy given increasing businesses are moving to remote or hybrid working as well as people eschewing tiny urban dwellings to live out in nature.