Every beginner housing investor asks the questions: “How to invest in real estate?” and “Where to invest in real estate?” Maybe you are wondering how much real estate knowledge you should have before buying an investment property. All these questions have widely popular answers, which you can find with a simple click in an internet browser. However, most of these “common” and “well-known” answers represent real estate investing myths. Real estate investing myths are some created stories, built on false beliefs. As such presumptions can negatively influence you and your real estate investing business, we decided to look closely into them. Here are the most commonly known real estate investing myths debunked.
#1 Making Money in Real Estate is Quick and Easy
One of the most popular real estate investing myths is that money in real estate comes quickly and effortlessly. By getting more real estate knowledge and learning how to invest in real estate, you will see that there is a high chance of success in the business. As everything else, though, there are some “IFs” and “BUTs”. You need to be patient and determined to succeed. Additionally, you need to invest a big portion of your time and effort in order to make a profit when financing rental properties.
#2 You Need to Have a Lot of Money in Order to Be Buying an Investment Property
Another of the real estate investing myths is that you need to be very wealthy in order to be buying an investment property. The truth is that financing rental properties might really get pricey. However, there are other ways to be a real estate investor. For example, you can have a partner with whom to invest. Another possibility is to start investing in cheaper properties; a suitable investment strategy here is fix-and-flips. You might also start as a wholesaler. There are many opportunities, you just need to look for them.
#3 You Need to Have Your Own Home Before Financing Rental Properties
Again, this is not true. Actually, investing in real estate can be a great way of financing a property, which pays for itself. Imagine that you invest in a single family home, which you rent out. The rent you receive monthly is $3,000. Meanwhile, you live in a property with $1,000 rent and you pay $1,000 as a mortgage. This way you live in a rental, while the property you invested in literally pays its own mortgage plus your costs. A great strategy, huh? One more of the real estate investing myths busted.
#4 You Need to Be a Licensed Real Estate Agent Prior to Becoming a Real Estate Investor
Being a real estate agent does not mean that you will become a real estate investor one day. Moreover, you do not need to be a real estate agent in order to become a housing investor. You do not need to be licensed in order to start investing in real estate. Of course, agents have a good knowledge of the real estate market and how to deal with different situations, but you can learn as well. There are many courses online as well as blogs, which can teach you how to invest in real estate. Additionally, the more you practice the better you will get as real estate investing is a “hands-on” kind of business. Do your research, learn as much as you can and get into action.
#5 Real Estate Is Classified as a Passive Investment, Which Brings You Passive Income
For sure you have heard the real estate investing myths suggesting that real estate is a passive investment. Well, that is not entirely true. There are some investing strategies which are classified as ones bringing a passive income to the investor. Nevertheless, it is important to note that even a passive investment real estate strategy requires some sort of involvement. For example, when renting out a multi family home or a single family home long term, the investor technically receives a passive income. However, he/she has previously put a lot of effort into finding the right property, deciding on the best rental strategy, choosing suitable tenants, etc. Additionally, the housing investor needs to also be involved in maintaining the property.
#6 Where to Invest in Real Estate? Close to Your Own Home!
When exploring where to invest in real estate, you might face one of the real estate investing myths- that the closer to your own home, the better. Sure enough, this has its benefits. Such pros are, for example, already having the right real estate knowledge- being familiar with the local housing market as well as the currently offered properties. An additional plus is the fact that you are close to the property. Therefore, it is easier to keep an eye on it and avoid travel costs. However, there are many great cities/ states for buying an investment property. They might be even more profitable and successful. Thus, if you want to be making money in real estate, you should not put such limits.
#7 You Do Not Need to Use a Rental Property Calculator
Do you want to know another one of the real estate investing myths? You don’t need a rental property calculator! Hmm…not true. Real estate market analysis is a must if you want to be making money in real estate. As real estate market analysis is hard to complete on your own, there are various tools which can help you. Such is the rental property calculator, for instance. Mashvisor’s rental property calculator computes various real estate metrics for you: cap rate, cash on cash return, potential rental income, etc. Additionally, the tool will help you in choosing the optimal rental strategy for your multi family home or your single family home. You need to use the tool as conducting real estate market analysis by hand involves a high risk of making a mistake. Moreover, it takes a lot of time and effort, which might interfere with the development of your business.
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#8 It Is Not OK to Break Even- You Should Always Aim for a High Profit
Starting a business is hard in every sphere and real estate is not an exception. When you buy a single family home or a multi family home, for example, you might expect to start making money right away. The truth is that you need to be patient and give time for your investment property to develop. This means that it is not only OK if your property breaks even the first few months, it is great. The latter is due to the fact that many real estate investing businesses start with losing money at first before they grow and become prosperous. Of course, making a profit is the ultimate goal and you should always keep that in mind. One more of the real estate investing myths debunked. If you are interested in learning more about the topic, make sure you read “Is It OK to Break Even on a Real Estate Investment Property?”.