The Hidden Risks Investors Miss - And How to See Them Before They Cost You
In the current property market, investors aren’t just searching for returns - they’re searching for certainty.
Not certainty that the deal will be perfect (no investment ever is), but certainty that the risks have been identified, priced in, and managed.
What’s becoming increasingly clear is this:
It’s not the visible numbers that trip people up. It’s the hidden ones.
And in most cases, the difference between a performing asset and a failing one isn’t the strength of the property, it’s whether the investor recognised the risks early enough to plan for them.
1. EPC Requirements: The Quiet Cost That’s Getting Louder
Energy performance legislation is tightening, and EPC upgrades are becoming one of the biggest unplanned expenses for landlords.
Most investors underestimate:
The real cost of improvements
The timeline for legislation changes
The difficulty of upgrading older stock
Even a seemingly small uplift, say from D to C, can run into the thousands once insulation, glazing, or heating systems are considered.
Ignoring EPC pressure is no longer an option. It needs to be priced into the deal from day one.
2. Service Charges & Sinking Funds: The Silent Profit Eroders
For flats and certain managed developments, service charges can be predictably unpredictable.
Risks often include:
Sudden increases from freeholders
Underfunded sinking funds
Planned works that haven’t been publicly disclosed yet
A deal that looks great on paper can quickly become unviable when charges jump 10–20% year-on-year.
Due diligence here is non-negotiable.
3. Refurbishment Costs: Reality vs Brochure Estimates
Agents often provide “guide refurb numbers,” but these rarely reflect true costs, especially in a tightening labour market.
A realistic assessment should consider:
Market-rate tradesmen
Material inflation
Contingency budgets
Delays due to planning or supply chain
Overly optimistic refurb assumptions are one of the key reasons investors find themselves in negative cashflow situations.
4. Tenant Demand Durability: Not Just ‘Can I Let It?’ But ‘How Fast?’
High-level demand stats don’t always reflect real tenant behaviour.
Smart investors look at:
Days on market
Typical void periods
Competition in similar stock
Seasonality patterns
Local employer shifts
A property that “always lets” is not the same as a property that lets quickly and consistently.
5. Licensing, Compliance & Incoming Regulations
Cities are expanding selective licensing zones, tightening HMO standards, and increasing compliance burdens.
If you don’t know the local council’s direction of travel, you could be walking into:
Additional licence requirements
Higher annual fees
Mandatory improvements
Stricter inspections
Compliance rarely gets cheaper over time, only more complex.
6. Future Capex: The Costs You Can’t See Yet
Roofs fail. Boilers age. Windows need replacing.
The most experienced investors think in cycles, not just immediate returns.
They map out 1-year, 3-year, and 5-year exposures and build them into the acquisition strategy instead of hoping for the best.
The Bottom Line
Most assets don’t underperform because of market conditions.
They underperform because the risk was mis-priced on day one.
The smartest investors aren’t just looking for upside, they’re asking the deeper question:
“What am I not seeing, and how will this impact me in 12–36 months?”
Risk ignored is risk multiplied. Risk understood is risk controlled. If you want to manage risk efficiency you need to work with O Johnston & Co who know what to look for.
