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Downside risk refers to the risks potential of losing money on an investment.
Losing money can refer to different things and can even carry different meanings to investors.
The most common downside risk for property investments are:
- Depreciation in value
- Less rental income than expected
- Construction delay
- Misrepresentation on the part of seller
It can sometimes also referred to as downside potential when investors ponder over whether to get involved in an investment.
Downside risk is something that every investors would have to think over when buying rental property.
This is because properties that don’t perform up to expectations can often be difficult to let go at a price where the initial investment can be recouped.