The real estate investing business is full of misinformation. With the business growing in popularity over the years more people have become “experts.” With the influx of information, theories and rationale it is difficult to decipher what is real and what is fake. If the person providing the information is passionate enough it is easy to be deceived. Like almost anything else you should always investigate everything you hear and make you own decisions. Without personal due diligence you can sit on the sidelines for years thinking you can’t get started until you learn otherwise. Myths accumulate and grow over time until for some they become the truth. By debunking these myths, you will be able to act without hesitation. Here are the five most common investing myths.
- All Deals Generate Profit: This would appear to be a no brainer but for some investors it is not. As obvious as it may sound, it is important to remember that you are investing. With any investment there is the possibility you can take a loss. It is easy to be brainwashed by what you so on the various investing shows on TV. They may it seem like you can simply recover from whatever obstacle is in your way and earn a profit. This certainly can happen, but it is often the exception and not the rule. Dipping your toe in the real estate waters does not guarantee a profit. If you pick the wrong house, in the wrong market and do the wrong work you can lose money. There is risk in every deal you are a part of. Of course, the benefits of real estate outweigh the negatives, but you need to know what you are getting into.
- You Need Money To Invest: One of the great things about investing in real estate is that you don’t need your own capital to get started. This is a major benefit over investing in stocks, bonds or any other liquid asset. There are numerous ways to get started in real estate without your own capital. The returns won’t be as high, but you can get your foot in the door and get started. Between private and hard money lending alone you have immediate financing options. There are more people with money itching to invest in real estate but don’t know how or where to get started. If you are willing to handle the real estate side, they may be able to provide financing. There are also lenders who would consider lending their capital on the right property. These hard money lenders don’t require upfront capital, only the ability to repay and the right vision for a return on their money. You can also take advantage of creative financing options from the seller and seek partnership opportunities. Having a nest egg of capital to draw from is helpful, but far from a necessity to get started.
- There Are No Good Deals Left: Anyone who has been in the business for some time knows that finding deals today is much more difficult than in years past. That being said, there are still good deals in almost every market. Long gone are the various foreclosure and deals where lenders were willing to part with properties at a steep discount. There are still a few short sale and foreclosure deals left, but they are not nearly as abundant as they once year. Like any other business if you want to generate leads and find business you need to go out and get it. Between friends, family, social media, mailings, fsbos and dozens of other methods there are still deals to be had. You have to work harder and smarter to generate a desired profit, but there are plenty of good deals left.
- Cheap Doesn’t Always Mean Good: There is a tendency to often associated inexpensive with getting a good deal. In the world of real estate cheap doesn’t always mean you got yourself a quality deal. In fact, often the opposite is the case. There are very few times you will get a deal where the seller simply wants to get out and you are in the right place at the right time. A more likely scenario is that your perception of value is misguided. If a seller is willing to part ways with the property at a severe discount there is often a reason why. A steal of a property in the middle of nowhere sounds great, until it is time for you to turn it over. What kind of buyer pool will you have, and can you generate a return on your investment? Inexpensive sounds like a good way to get started but will often leave you with a lemon.
- Rental Properties Run Themselves: You may have friends who brag about how easy owning a rental property may be. They talk about waiting for rent checks to come in every month and having the best possible tenants. While this may be the case, it isn’t always like this. There are times when owning a rental property is a giant headache. Tenants stop paying, there are issues with the property and unexpected maintenance needs to be done. As great as rentals are, they can be work. You need to stay on top of the property at all times. Getting rent checks is nice, but you can’t assume everything will go as planned.
It is always a good idea to vet anything you hear with at least three independent sources. Never take one person’s word or opinion on something as an absolute truth. Often times many of the myths you hear are nothing more than hearsay.