The Risk of Real Estate Investment(II)

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(4) Interest rate risk. It refers to the possibility that the change in interest rate will bring losses to real estate investors. The change in interest rates has two main effects on real estate investors: Firstly, the impact on the real value of real estate, if the use of high interest rate discount will affect the net present value of real estate. Secondly, the impact on the cost of real estate debt funds, if the loan interest rate rises, it will directly increase the developer’s development costs and increase its debt burden.Galvanized Steel Tube

(5) Business risks. It refers to the possibility that the actual operating results will deviate from the expected value due to poor management or mistakes. There are three main situations in which business risks arise: one is that investors may not be able to obtain accurate and sufficient market information, which may lead to mistakes in business decisions; the second is due to the legal provisions and urban planning regulations involved in the transaction of real estate by investors. Taxation regulations and other failures to understand the investment or transaction failure; thirdly, due to low management level and poor efficiency, the failure to take the property in the most favorable market opportunity, so that its vacancy rate is too high, the cost increases, the profit is lower than expected, and so on.

(6) Financial risks. It means that due to the deterioration of the financial status of real estate investment entities, real estate investors are faced with the possibility of not being able to recover their investment returns on time or in a timely manner.

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