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The zero-liquidity trap
Real estate has the worst liquidity of any available investment vehicle. Attempting to sell an apartment quickly during a financial crisis almost always leads to a 10–15% discount on the market price.
By owning property, you freeze significant capital in concrete that cannot be easily liquidated in parts. If you lose your income or face emergencies, you will be forced to choose between selling the asset at a loss or taking out a high-interest personal loan.
Liquidity is defined by how much you lose when trying to cash out here and now.
#personalfinance #assets #risks