A huge loss due to speculative investment in real estate is not a remote possibility. Studies show that non-professional brokers are more prone to such losses, while professionals who know the ins-and-outs of the trade have gained. Capital appreciation in real estate investing is certain as property values are constantly on the rise. While depreciation affects the value of structures such as a house or an apartment building, the value of the land does not depreciate. In this case, capital appreciation is proven to be real.
Speculative investments fail when the buyers base their decision upon unreliable information. An example would be buying a lot in an area rumored to be developed as a huge shopping mall at a stage when developers are still considering options. While assessed values rapidly change when new development comes to an area, fair market values tend to stagnate in areas where development is delayed or have been ruled out as options pending introduction of new roads or a bridge.
As stated above, speculative investments fail because these are based on speculation rather than reliable business intelligence. An investor needs to be discerning in validating facts floated by real estate brokers. In order to sell, they tend to release half-truth information to lure buyers.
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