Let's first take a look at the banks or finance companies that are lending out the money. Sure most of these people have gotten a down payment on the property they are lending the money on, but they are financing the rest so they are taking a risk because of the fact that not everybody will pay their mortgage. And this is a risk because if the people fail to pay what they owe then the bank or finance company loses money, sure they can sell the property but they are still selling it at a loss. In fact this is what has been going on in the real estate market currently, loans were made that people couldn't afford the monthly payments on so they ended up having to give up their houses or property and the banks in turn lost money.

Now as an individual investor you might be wondering how it is you are facing a capital risk when it comes to investing in real estate. Many people feel that this is a sound investment and not much risk because there is always some kind of use for land, but what happens if you invest all of this money into real estate and then the housing market slows down and people are no longer buying houses? Or what happens if you purchase real estate with the hopes of renting it out but the housing market becomes hot and nobody is willing to rent? Even as an individual investor there are still capital risks when it comes to investing in real estate because you are investing hard earned money and sometimes things do fall through and you lose money. A perfect example is you buy a commercial property to rent out but can't find any renters you can either pay the mortgage yourself or turn around and resell the property but either way you are losing money and you might even lose more if you can't sell it for what you paid.

But the good news is that even though there is a capital risk when it comes to real estate investing the capital risk is rather small and it is a good investment.