Knowing the Risk, Planning & Knowledge
Fear of Risk
Everybody has a personal risk tolerance profile; some of us are quite comfortable with perceived risk while others are highly risk-adverse.
There are six main fears when buying a property:
- Overcapitalisation – that is paying too much, being ripped off…there are so many stigmas associated with estate agents and concern around agents ripping off undiscerning buyers.
- Buying a lemon – everyone fears their property underperforming in terms of capital growth when benchmarked against others in a similar area.
- Troublesome tenants – who either trash the property or don’t pay their rent.
- Vacancy problems – a common fear is having a property that’s hard to let with low or no tenant demand.
- Lifestyle sacrifices – if the property ends up costing more than initially expected resulting in extreme negative cash flow.
- Market crash – they fear a ‘bubble’ or downturn will strike as soon as they’ve purchased, creating a negative equity position.
All are legitimate fears but there are actions that can address every single one.