To What Extent Risk is Part of the Equation When Coming to Invest in Real Estate

In 2021 too, many people still have apprehensions about investing in real estate, even though it has been proved on more than one occasion that it is a worthwhile and safe field. Albeit, it is unquestionable that a risk exists and that it is part of the equation; however, it is important to understand to what extent risk should be a significant factor when coming to invest in real estate.

Risk and profit and what lies between them

On the one hand it is known that the more a deal is considered risky, the greater the potential profit. On the other hand, the realm of real estate is still considered by many as a gray area, especially if the unlocking of the land for urban development is still far off. To explain: When purchasing land which is in its initial unlocking stages, it is a known fact that the moment the deal is completed, that is, the land is unlocked, the return will be high, since the land was purchased at a relatively low price, and when sold after it is unlocked, it will be priced much higher. However, the longer one waits for the unlocking process to progress, albeit the risk relating to the land’s status decreases, but at the same time, the investment price just goes up and up. This means the more one plays it safe, the lower the returns, on the face of it. This being the case, what would be the right course of action when seeking to attain maximum return in real estate investments.

The calculated risk/gamble – the formula for success

Often the very fact that the deal at hand is considered safe, and it grants peace of mind, for many is of tremendous value, even if it adds to the price. There is, however, a way out to the potential monetary loss. That is, as long as, before investment takes place, we approach a professional investment company possessing a positive resumé, and considerable proven experience in implementing similar, worthwhile and well-organized investments, there is little need for concern. Even if the land has yet to be unlocked, it is possible to ascertain that this is not an irrational “gamble”, but a rational decision, since the company has conducted all the necessary enquiries and investigation in advance.

All that glitters is not gold, and not all that is “destroyed” is bad

Investment in real estate can often be a tricky move. People tend to believe that if they purchase a prestigious property in a prime location, they are sure to make a good profit, since the demand is high and someone is bound to pay its full value. In the real estate realm, however, there is no room for throwing up assumptions into the air and hoping for the best. In the real estate world, every decision must be backed up by data. Indeed, occasionally, on the contrary, the opposite action might bring the desired yield. To Illustrate, often investing in a neglected apartment in southern Israel is an advisable investment. Since the price is low, demand is high, and with minimal investment in the apartment, its value can be raised considerably.

Should a person take a risk? It depends who!

So what is the bottom line? In the real estate field, there is considerable room for rational calculations, but there is also room for taking risks. However, this needs to be backed by information and experience. The idea is one must be able to spot opportunities for financial investment; even if at a first glance the scenario does not seem ideal, still we can examine what direct and indirect factors might advance the deal to the next stage.

At any rate, taking the risk need not be at the expense of the private investor, but the entire process should be conducted prudently and managed by experienced professionals.

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