What are the risks associated with investing in real estate?

Investing in real estate often appears attractive due to the perception of stability and long-term appreciation, yet it carries significant risks.

One major risk is the potential for economic downturns, which can lead to job losses and thus affect the ability to pay mortgages. This scenario can create a situation where housing prices collapse, as seen during the 2008 financial crisis, when many individuals lost their jobs and homes.

• The liquidity of real estate is low, meaning properties don't trade frequently, making it difficult to quickly sell in a market downturn.
• Maintenance and unexpected costs associated with properties can add to the headache of being a landlord, particularly outside major cities.
• Using leverage through mortgages amplifies risk; if income decreases, obligations to repay mortgages remain constant.

Overall, while investing in property can yield returns, it is imperative to recognize the underlying economic factors and personal financial situations that can make such investments risky.