Investment property provides a fantastic opportunity to make a tidy profit.  That is, of course, if you do your homework and buy at the right time, in the right location.

But although there are many long-term benefits to owning a piece of real estate, it can also be fraught with risk.  And quite often, the threat is entirely outside the investor’s control.

The current market presents no exception to this general rule.

Economists are keen to point out several factors that could jeopardise growth in both private and commercial sectors.

 

1. Rising rates

Undoubtedly, interest rate hikes are causing much concern among residential property owners.  But commercial confidence has been shaken too, preventing businesses from making assured decisions.  This may see fewer lease renewals for landlords.

 

2. Working from home

The work-from-home trend has created better lifestyle opportunities for private residents.  But it’s left a gaping hole in the CBD commercial sector, with tenants feeling uneasy about signing long-term leases.  This is not good news for landlords.

 

3. Inflation

Residential owners are being very cautious about spending.  But this has had a knock-on effect in the retail space, too.  Businesses are suffering because no one is buying.  They’re then at risk of needing to close their doors.

 

4. Energy costs

It’s without question that rising energy costs are hitting residential households hard.  But businesses are having to put their prices up to cover the cost of commercial rates too, making it harder to keep afloat. In turn, they may opt out of their lease.

 

5. Prolonged vacancy

With the increase of commercial costs, tenants may default on their lease or need to vacate.  Landlords clearly don’t want to be footing the bill for long-term vacancies.  And even though private vacancies are rare, landlords still need to find tenants willing to pay the soaring rental prices.

 

6. Tighter credit controls

It’s truly a banker’s game.  If the economy worsens, the first thing they’ll do is increase their lending criteria. This creates enormous challenges for investors in either sector.

 

7. Changing occupancy

Tenants are definitely spooked.  They may not be able to afford to maintain a lease agreement and want out.  That has them angling for shorter leases and break clauses – which would pose even greater financial danger for landlords.

 

So, if you want an investment that lowers the risk, guarantees the profits, and is gentle on your savings, let’s chat.  We’re all about keeping growth alive and protected.