One of the biggest challenges of this investment is its unpredictability. Krulický and Horák note that real estate has proven that it can become resilient to some economic factors that include pandemics and economic recessions. One of the basic assumptions from the experts is that if a property is bought today, it can still be sold some other time. Real estate values may rise over time but the market is still unpredictable. This means that a person’s investment can still depreciate. Several factors may lead to this depreciation. They include government policies, interest rates, demographics, interest rates, and the supply/demand curve. Another challenge is the investor choosing a poor location. When buying an investment property, location should always be the priority. As Eves states, location is the engine that determines other factors that may help to make profits. Location may influence the demand for your properties, rental rates, and the ability of your properties either to appreciate or depreciate. Poor location is likely to give lower returns while the best locations will give the best returns. Another challenge for real estate investment is the negative cash flows. In real estate investment, negative cash flows refer to the money that is left over after paying all the expenses, insurance, taxes, and mortgage payments. Negative cash flows happen when the money being invested is less than what the investor is getting. Some of the causes of negative cash flows include high vacancy rates, costly maintenance, and high financial costs on loans.
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