top of page

HOME  |  KEY INVESTMENT RISKS


 

6 Types Of Key Investment Risks In Real Estate

 

A   Structural Risk

B   General Market Risk

C   Financial Risk

D   Asset-Level Risk

E   Legislative Risk

F   Location Risk

Intro:

As far as investing is concerned, the real estate sector has appealed to investors since ages. Given a choice, more serious investors prefer purchasing property as an investment over bonds, mutual funds etc. Nevertheless, just like any other venture, there are risks and rewards of real estate investment as well. Whether you are a first-time home buyer or an experienced investor, it is important to know about the risk factors. Here’s a list of real estate investment risks.

A Structural Risk:

This real estate investment risk has everything to do with the financial structure of an investment and the rights that the structure offers to its individual participants. Unlike the name suggests, it has nothing to do with the actual physical structure of your property. As you are aware, in a standard investment, there are 3 parties – a sponsor, a lender, and then equity investors. When debt is involved, repayment in the event of liquidation is done based on rankings. A senior secured loan will be the first to get a pay out; equity holders are the last ones to receive it. Thus, equity investors have to face the highest level of risk. Similarly, when a joint venture is formed, a legal agreement is drafted that mentions each participant’s contributions and profit distributions. So structural risk is also present in this scenario.

B General Market Risk:

Inflation, deflation, recession, the general economy, interest rates, and several other market developments cause ups and downs in all investment sectors. And although market volatility cannot be avoided, smart real estate investors generally safeguard themselves with a diversified investment portfolio. They also get in touch with experts and take their help to figure out a plan based on overall market conditions.

C Financial Risk:

Financial risk is directly proportional to the amount of debt you have taken to purchase a property. Since interest rates are always fluctuating, this can lead to an increase in the financing costs. What are the terms of your investment? How much are you willing to invest?  For what duration? What is the rate of return? All these questions need to be answered before investing in a property. Afterall, the rate of return should always be proportional to the level of risk involved. Wondering which property is an example of a high-risk investment? If you want to take on more risk as an investor, you can buy a C Class building in a C Class locality. You can then strive to bring about a change and upgrade the area so that the returns would be higher.

D Asset-Level Risk:

There are many types of properties you can invest in – these types are known as asset types. Investment in any asset type comes with some risks. For example, since residential apartments are always in demand no matter what the economic condition, multifamily real estates are considered to be low-risk. However, they also often provide comparatively lower profits. A high-risk investment is characterized by either a huge chance of loss of capital, or under-performance of the property. For example, hotels provide short, seasonal stays and depend a lot on the travel and tourism sector. They are therefore considered to be high-risk investments. But their profit margins are higher compared to apartments, shops or offices.

E Legislative Risk:

Out of the many types of risks in investment, this is the one that needs careful consideration. Modifications or changes in regulations by the government can substantially hamper your business prospects; these changes might adversely affect your real estate investments. Legal regulations like registration procedures, rent control laws, taxes, tenant laws etc. should be studied carefully before investing.

F Location Risk:

This type of risk refers to the actual location of the property. Where is the property you are considering located? Is it in an urban area or is it in a suburb? Is it in an up-and-coming location, or is the area gentrifying? Which schools, grocery stores, and hospitals are in the vicinity? What are the crime rates like? Which types of real estate investments are you considering in the locality- commercial or residential? Where you invest will decide how much profit you will reap.

 

 

HOW WE TACKLE KEY INVESTMENT RISKS IN REAL ESTATE 🔗

RELATED ARTICLES:

ALL IN 1 INVESTMENT STRUCTURE  🔗
PROPERTY MANAGEMENT  🔗

Investing in rental housing projects in the free sector, particularly in the mid- and upper range rental segment, in the strongest European economic and demographic areas.

www.cruz.capital[trans].png

INVESTING

PROPERTY MANAGEMENT

REAL ESTATE BROKERAGES

PROPERTY MAINTENANCE

IN-HOUSE BUILDING CONTRACTORS

www.crei_edited.jpg
KEY INVESTMENT RISKS
Tall Buildings
Property Maintenance
 

We strive to offer our tenants high quality rentals in great communities. We take pride in our long-lasting resident relationships and we work with our tenants to ensure they love where they live, every day.

In 2022 we integrated Crei Services (Fka De Wit Building Contractors) providing high quality maintenance to our real-estate. They also function as general contractor for our new developments we invest in.


[ READ MORE ]
www.crei.services.orange.trans.gif
Property Management  
  • Full property administration
  • We advice, set rent levels, process invoices and collect rents
  • Provide the promotion and marketing of rental apartments and check new tenants and their incomes
  • We check current tenants and carry out target group analyses
  • We monitor the sustainable multi-year maintenance plan and budgets, order daily and scheduled maintenance and provide advice on constructional changes. With regular points of contact for tenants, including the Customer Contact Centre.
[ READ MORE ]
 

Private Real Estate


Access to a full range of direct real estate investment opportunities across risk profiles and sectors and expertise to deliver on an asset’s complete lifecycle.

QUALITY INCOME GENERATING R.E. ASSETS


We have access to a full range of direct private real estate investment opportunities across risk profiles and sectors. We leverage the entire platform and acquire, develop, reposition, manage these assets or select the best-in-class partners to join.

DUTCH AND US CORE

Our platform provides access to institutional-grade, sector-specific real estate strategies that are founded on knowing the lifecycle of investing in prime property. We seek to invest in and operate quality, income-generating assets and attract occupiers who provide consistent long-term cash flows to drive performance.

European Residential
 
 

We aspire to be the leading operator of high-quality core residential housing in prime European locations. Local and with an entrepreneurial spirit, the European Residential team is innovative in its approach, and passionate for driving value and sustainable outcomes.

Our program focuses on investments in top locations designed for the “New Economy” that we believe will outperform and be resilient through cycles. 

We reposition and develop assets t
o create core properties in sectors experiencing structural change, i.e. logistics centers, to optimize income and enhance value.

Copyright 2014-2023  © Crei Management Holding B.V.  | Amsterdam | The Netherlands. All Rights Reserved

 
CREI Management Holding B.V. is a privately owned Cruz Capital Management L.P. affiliated business not offering any services to the general public. Information and services on this site are provided by/or through Cruz Capital Management L.P. It is provided as general information and is intended for its institutional and qualified accredited investors, as well as professional clients (as defined by local laws and regulation),  it should not be considered a comprehensive statement on any matter and should not be relied upon as such.
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up. All investments involve risk.
 
 
The material on this website has been prepared by CREI Management Holding B.V. in cooperation with- and approval from Cruz Capital Management L.P. and is for general information only and may not necessarily represent views expressed or reflected in other communications, strategies or funds. None of the information contained on this website is intended to constitute any offer to sell or an invitation or solicitation of an offer to buy any product or service by CREI Management Holding B.V. and must not be relied upon in connection with any investment decision. Nothing in this website should be construed as investment, tax, legal or other advice.
Products and services referred to on this website are subject to possible legal and regulatory restrictions, including possible restrictions limiting participation to professional and/or other categories. Products and services may not be available in all jurisdictions. 
 
 
bottom of page