Make Real Estate Great Always by Alpha Capital Investment: Key Risks to be considered

Real Estate Investment is a “Great Investment” asset class. However, as for each investment providing great returns, there are some risks to be considered.

When thinking of investing in real estate, please do think of the following points:

-         Business conditions: rents and property values which evolves with national and local economic conditions (GDP, CPI aka inflation, interest rates, unemployment rate, consumption, industrial production, etc.);

-         As almost all alternative asset classes, Real Estate is “Illiquid”. This means that you cannot sell it as a share and that some selling expenses will be needed;

-         Demographics are very important. You need people to work, to live in, to buy, to make the economy works, so businesses can make a profit and pay rents

-         Environmental considerations need to be seriously considered;

-         If you invest in the debt side of the real estate, do think about the unexpected inflation particularly at this moment even if there is an ease of inflation (EU: 1.9% in 2018 vs. 1.6% expected in 2019);

-         Have a close look on indicators: Leverage (Loan-To-Value aka LTV, Loan-To-Cost aka LTC, ICR: Interest Coverage Ratio = NOI/Interest, DSCR: Debt Service Coverage Ratio = NOI/Total Debt Service);

-         Because of new regulations, norms, and demands, new property are generally leading the trend and time;

-         Funding is key!!! Think carefully of cost, affordability and availability of capital;

-         It (real estate) is a real asset!!! Thus, please consider Asset management and Property management before acquiring it;

-         A great job has been done so to improve transparency in the industry. Nevertheless, there is still (a lot of) works to be done to improve the availability of information;

-         A lot of more other risks must be considered!!!

Despite all risk mentioned above, Real Estate remains a great investment asset and offer excellent investment opportunities and returns!

Make Real Estate Great Always!

Abraham Mboyo, MRICS | CEO at Alpha Capital Investment

www.alphacapinvest.com