Whenever you bring up the topic of becoming a real estate investor, you are likely to hear some sentiments on why you shouldn’t or can’t get involved. Becoming a real estate investor has developed a reputation for being challenging. This reputation creates fear and has held back several prospective real estate investors from taking on new opportunities. Generally, not many people invest in real estate beyond their homes. Some potential property investors have also ended up making bad decisions and suffered significant losses due to some lies about real estate investing. It is important to note that not all that you hear about becoming a real estate investor is true. There are many lies and myths in the world of real estate investing that need to be dispelled.
The 5 Biggest Lies You’ve Probably Heard About Becoming a Real Estate Investor
1. You need to have a lot of money or be rich to invest in property.
The number one lie about becoming a real estate investor is that you need to be rich and have access to a lot of capital to get into the property game. Yes, certain large scale real estate projects are going to be expensive. However, there are many methods of financing an investment property with little or no money. You just need to be creative. For instance, you can partner with investors who have capital but lack the time, skill or disposition to implement their own real estate projects. These investors can be family, friends, or even total strangers who want to put their money to work. You can also use the concept of property flipping where you acquire distressed properties that need renovation at a large discount and spruce them up. You could also consider starting out as a real estate wholesaler.
Related: How to Invest in Real Estate with No Money: A Beginner’s Guide
2. Property values will double in a short period of time.
You might have heard people saying that properties will quickly double in value in a decade or so. This is also another lie about becoming a real estate investor. This misconception tends to make many people rush into buying an investment property. Making money in real estate is not that easy. You not only need to be determined to succeed but also patient. While the value of some properties may double in a span of ten years, not all properties perform so well. Not all properties are created equal. Most investment properties will actually take a long time to appreciate in value (but it’s definitely worth the wait!). Some of the factors that can lead to property appreciation include planned developments and improvement of infrastructure. Sometimes, investment properties also depreciate. For instance, properties found to be in a riparian area or road reserve may prompt demolition by the government, consequently going down in value.
3. Real estate is an entirely passive investment.
You must have heard that real estate is a passive investment. Well, this not totally true. Many people think that they will simply sit back while the profits roll in. Even though there are some real estate investing strategies that can generate passive income, it is crucial to note that they will need some sort of involvement. When it comes to becoming a real estate investor, you can make your investment as passive as you want. However, hands-off real estate investing has fewer profits. It is a business like any other. There are no shortcuts, especially if you want to make the most of your investments and want to avoid unpleasant surprises.
When buying your first rental property, there’s going to be a lot of work involved. You will need to take your time to find the right investment property, coordinate any renovations required, and decide on the best strategy. You will also need to find reliable tenants through tenant screening and take care of the general maintenance of the house. Becoming a landlord is really a lot of work!
Related: Passive Real Estate Investing for Beginners: 8 Ways
4. You should only invest close to your home.
When looking for a good location for investing in rental property, you might hear one common lie about becoming a real estate investor – that you should only invest locally. Sure enough, investing in rental property closer to your own home has its benefits. You are likely to be familiar with the local housing market, real estate professionals, and the properties that are currently for sale. It will also be easier to manage the property without any travel costs. Nevertheless, it is possible to find more profitable investment properties in other cities or states. Thus, if you want to be a successful real estate investor, you should not limit yourself to your local area only for the sake of convenience. You should branch into other markets to avoid missing out on great opportunities.
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5. Raising rents drives away tenants.
How much do real estate investors make? Well, there are some investors who become millionaires but there are also several investors who make very little. One way you can increase your income when owning a rental property is by raising the rent. However, many landlords usually fear that raising rental rates will make tenants leave. This is also another lie about becoming a real estate investor that limits investors from making more money from their investments. If you have improved the functionality of the rental property, you can charge a price that is a bit higher. You can also increase the rent of a property that is below the market value to compete with other similar properties in the area that have the same value. You will still get tenants.
The Bottom Line
While some people will simply discourage you from getting into real estate, there are also those that will give you bad advice that can lead to bad decisions and significant losses. In reality, what some people know about becoming a real estate investor is entirely false. There are thousands of lies and assumptions out there when it comes to real estate investing that can prevent you from building a successful real estate career. With the right knowledge and steps, becoming a real estate investor can be a profitable venture for anyone.
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Related: Are You Ready to Become a Real Estate Investor?