Finance February 13, 2014 Last updated January 11th, 2022 2,751 Reads share

3 Reasons Why Speculative Investment In Real Estate Is Very Risky

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If you’re thinking about your post-retirement plans, or if you’re just itching to do something with your savings – it’s no surprise that the word “investment” comes into mind.  If investing in real estate has crossed your mind for some time now and you’re ready to take the plunge, take a step back and assess your actions and motivations.

If you’re planning to invest in this particular venture, make sure to consider certain risks that may make or break your plans. Be wary of investing based only on speculation. Don’t count on extreme success if you’re making speculative investments in real estate, and here are three main reasons why.

#1. People are unpredictable

You work with people, and if there is one thing that people have proven over the years, it’s that they are predictably unpredictable despite being in a professional setting. For example, if you are doing deals with tenants and real estate agents, it is always a possibility that some of them may outwit or out-negotiate you, especially if they get the idea that you are a speculative investor.

Make sure that you’re not going in blindly and that you have enough experience to prove that when you say business, you mean business.  Of course, it’s most important to communicate well with the people you make transactions with—and if you must, do it nicely. An ounce of goodness definitely goes a long way, after all.

#2. Economies are liable to change

If you’re a speculative investor, it’s a given that you base your investments on how the economy is doing, hoping that certain circumstances will influence your investing decisions. However, just as people are unpredictable, so is the economy. Investing on real estate might seem like a good idea at first, but in this economy, it’s either the properties that encounter a major loss or worse, or it’s your bank account that suffers from a particular depressive plummet. You know that your money doesn’t solely revolve around real estate, because if it does…

#3. You can lose everything

The problem with speculative investing is that you have calculated risks and stick to those even when things are difficult. You will insist on holding out until the end, expecting something to come out of your investment. Call it optimism and persistence, but sometimes, you wouldn’t acknowledge defeat until you’re crying help from bankruptcy.

Did you know that speculative investment is like gambling? If your calculated timeframe doesn’t give back the profit that you expected, you might need to let go and consider it a loss. Continuous monitoring of your investments is a necessity to make sure that you would know when or if you need to cut your losses.  Also, in terms of personal conflict, it’s a must that you don’t let your emotions or leisurely wants influence your investment decisions.

Instead of doing speculative investment on real estate, you can use your savings properly and focus investing on value. If you’re not a professional, you should know to take a step back and study your dream investments first before doing anything brash—especially if you’re using a housing loan to make such a drastic move.

Personally consult someone who knows how real estate is and start there. Plan ahead; be a wise investor and don’t assume the outcome of your investments. Instead, research and study your assets and how the whole real estate business works. As Benjamin Franklin said, “An investment in knowledge pays the best interest.”

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Cristina Beltran

Cristina Beltran

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