We’re always giving you reasons why you should invest in real estate, today we’re giving the reasons not to invest – when real estate simply is not your gig.
1. You Don’t Have Money
It’s a money making investment, and it’s a money consuming investment. But to invest in real estate in the first place, you need money – often lots of it. To get started in real estate you need to have enough money to put in for a significant down payment. Additionally, you’ll need to consider renovation and repair costs, marketing costs, time costs, insurance costs, taxes, monthly mortgage payments, to name a few.
And one thing we can never stress enough, is to never invest in real estate for the expectation that you’ll be making a lot of money. Especially if you don’t have enough capital to start with. Why? This takes us to the next point.
2. Slow Growth
Real estate is not the fastest growing investment. So if you’re in it for a fast generating investment, maybe you should not invest in real estate. Real estate can only grow with significant capital investments. You may sometimes need to use your revenue streams to invest in other real estate activities to keep generating cash. In a nutshell, it’s going to take time for you to get where you plan to get, and to make the desired revenues.
3. It Requires a Lot of Effort and It’s Time Consuming
If you’re not willing to sacrifice, do not invest in real estate. We’re talking about time, effort, and money. To be a successful real estate investor, you have to be willing to go all in. Whether you’re searching for a property, or managing the payment for the property. Never mind tasks like fixing and renovating new properties (and in between tenants), successfully marketing your property, screening and choosing tenants, managing tenants and tending to their needs – including the 2AM call about a plumbing problem, collecting rent, evicting tenants who do not pay rent, screening for new tenants…you understand the cycle!
All of this takes time and it’s all pretty much a priority in real estate, which is why it’s time consuming. You can’t really postpone tasks until tomorrow or the week after, especially if they are critical matters.
4. Management
Unless you hire a property manager, you’ll be the one managing the property. And even if you do hire a property manager, you’ll still need to partake in the administration process. Managing real estate becomes especially difficult when you own/plan to own multiple properties. Then, it’s surely going to be a daunting task. After, managing real estate is so much like managing your own business. Now real estate can be part-time, but even then, it’s going to consume so much time and effort that it may turn into a full-time job.
5. Debt
Debt is an instrument that allows you to invest in real estate, but it’s a huge commitment. Before anything, ask yourself, are you ready for such a long-term commitment? Not everyone is, and if you’re not – that’s okay. You have to be comfortable with the idea that you’ll be indebted for a considerable period of time, if not, real estate will become a source of stress that you may not be able to handle or manage. It’s important to note that not every real estate investor necessarily goes into debt. But it is more likely that you will if you do not have significant capital.
6. Real Estate Market / Economy
While real estate investing is less risky than other investments such as stocks and bonds, it still carries its own risks. Some real estate experts are forecasting a possible recession in the next few years. Terms like “soaring prices”, “market volatility”, “inflation”, and “housing bubble” are becoming more and more notorious in real estate. Of course these are mere predictions at the time being, so don’t get pessimistic if you want to invest in real estate. There are various reasons why investing in real estate is a great idea. So if you’re about to invest in real estate, do not get discouraged by this. Yes, real estate is risky, but what investment isn’t?
The Bottom Line
The purpose of this post is in no way to discourage you from investing in real estate, quite the contrary in fact. By identifying the challenges that come with real estate investing, you better equip yourself to address them. Moreover, it helps you with knowing when the right time is for you to invest in real estate. Just because it’s the right time for an investor doesn’t mean it is for you. Take your time to learn about real estate investing, and use Mashvisor’s multiple tools to aid you through the process. When you do that, and when you don’t consider any of the above reasons reason enough not to invest in real estate, go ahead and jump in!
What do you think? Can you come up with another reason why you shouldn’t invest in real estate?