Disadvantages of investing in real estate in kenya
Every business has its own ups and downs. It is not always a smooth ride. Just in that sense, real estate investments have their own disadvantages as much as it would be having its own advantages. In this article, we are going to cover the disadvantages of investing in real estate in Kenya. This gives you an insight of the many risks and the problems that you may incur while in such and industry period
The industry requires management and maintenance
One of the essential skills that an investor in the real estate industry should have is his management. Real estate investment involves monitoring and managing of property and especially to those who have invested in rental property. property needs to be taken care of, with frequent repairs and renovation. Any property must be maintained and if ignored, it can extend high costs within a short period of time. It is not just about the buying but also about the maintenance.
Real estate has low liquidity rate
Many investments are known for high liquidity. They can be bought faster and sold in the same way. Real estate on the other hand is highly illiquid in emergency need of cash and in emergency need of cash, the property cannot be sold quickly. Real estate investment is considered a long term investment because of its nature. Also investors in real estate investments should be prepared to hold the property for a longer period of time.
Real estate investments have a lot of hidden costs including higher transaction costs. These hidden costs may significantly influence the value of the property. This also includes the transaction costs that are always high. Such costs also affect the value of property by making it harder to either purchase or make profits.
Real estate investment especially for the first time buyers, they may lack information there is related to the property. This is realised later when we are paying for the same property. They lack to know if they’ve made a good deal or not until we have done buying the property. Investors in the rental property also lacked the information on when they have fluctuation in demand demographics. This leads them into costs such as vacancy costs. Real estate investments therefore means dealing with information that is correct in the market as well as having alternative ways in which you can deal with inefficiency of information in the market.
In other investments, there is always an advantage to aids as well as its disadvantages. A wise investor will always balance the advantages of certain businesses over the disadvantages. In real estate investment, the advantages outweigh the disadvantages. It is always advisable to have a purpose and goal while investing so that it can be satisfying as to whether the advantages make sense in the future or not, or if it is worth waiting for or not.