Apartment Management: Ownership Disadvantages

There are disadvantages, too, to purchasing real estate as an investment. A wrong decision in the original purchase or in the method of operation may be enough to wipe out the investment. Market conditions — fluctuating as they do — as well as local laws and ordinances can adversely affect the situation. Rent control, specialized health and safety requirements, and significant changes in property tax rates, for example, can be damaging blows to real estate investment. More than that, real estate owner ship means the loss of the liquidity of investment capital. For example, while stocks, bonds, and savings accounts can be cashed quickly when funds are needed elsewhere, real estate may require sixty days or more to liquidate—and then perhaps at a loss because of the quick sale.

Ownership of income-producing real estate involves business management problems that do not appear in most other forms of investment. In addition to the professional management needed to operate the property, there must be supervision of the management itself. More than that, investors in real estate face the fact that bricks and mortar do not last for ever. Ultimately, all that will he left is the land itself. Clearly, few investors expect to live long enough to face this eventuality.

Despite these formidable shortcomings and the fact that many owners are not making money on real estate investments, private investments in multifamily housing properties still offer opportunities for profit. In fact, it can be said that investment in all forms of real estate provides an attraction shared by no other form of investment. This is because land, with or without improvements, is something tangible and inexhaustible that historically has appreciated in value.

PREV: Goals of Ownership
NEXT: Forms of Ownership

top of page   Home