Real Estate Investing Basics

The 3 Most Common Real Estate Myths Beginning Investors Believe

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Business Management
29 Articles Written
newbie-myths

Every single year, many individuals get into the world of real estate investing. Some of them think of it as a speedy approach to profit. This is a result of the famous “get rich quick” attitude that makes many of the beginner real estate investors fall flat.

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Newbies tend to go into the “win or bust” mode. They put resources into courses and books and expect an astounding boon to come their direction. Unfortunately, most of them never set foot in a property.

Most of these investors fizzle since they don’t enter into real estate business with the right mindset. They are so excessively concerned about creating passive income that they overlook the nuts and bolts of investing, which include networking, negotiation skills, and some hands on supervised experience. The goal of achieving financial freedom is a good thought, but without the basic foundations, the chances of success decline considerably.

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The 3 Most Common Real Estate Myths Beginning Investors Believe

1. Wholesaling is where newbies should start.

It has been said so many times now that many folks probably think it is true. However, wholesaling is not all that it appears to be. Everyone gets told how simple and profitable it can be. Yes, you can make a good profit with wholesaling, but it’s not easy and requires expertise and huge investment.

Related: The #1 Thing Newbies Should Do to Get Started With Multifamily Investing

As a wholesaler, you need to understand what the true ARV is and be in the ballpark on a rehab estimate.  There isn’t a quicker way to lose credibility than to send a deal over with the ARV and repairs way underestimated. I can’t tell you the amount of calls I’ve received from wholesalers saying that they had a deal that was “move-in ready.” Truth be told, the rats were looking for a new place to live.

2. You have to be wealthy to start.

People often believe that you ought to have loads of cash in your bank account. However, in reality, that’s not usually the case. Real estate is quite lucrative, and a lot of the top industry leaders are effective in using other people’s money to work their businesses.

You need some amount of money for putting the property under contract and for closing costs, but apart from that, you can get financing. If you’ve found a good deal, you would be amazed to find many lenders (conventional and private) willing to fund it. When you first start off investing, one of your biggest hurdles will be finding capital. After you establish yourself, finding capital becomes easy. In reality, there is more money than good deals.

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3. You’ll be able to save money by doing everything yourself.

New investors suppose they can spend less by renting houses, making repairs, and handling everything on their own. The biggest problem is most of the beginner real estate investors don’t understand how to manage a property, how to find a tenant, or how long things actually take. They are working full-time and trying to manage the property on the side.

Related: The 5 Most Annoying Misconceptions that Newbies Love

I have full-time crews, and it takes me at a minimum of three weeks for a rehab. How long is it going to take you to the rehab on the weekends? It will take a long time. In the end, you would be better off just getting a second job. It would be a lot less stressful.

I’m not saying that it isn’t possible to save money this way; it is possible to economize by managing things yourself.  But you should definitely have the time, right people, and experience to get the job done. Just because it is the “cheapest” doesn’t mean it is the best choice.

Have you come across any other misconceptions? 

Please share in the comments section below.

Mark Ainley is an investor, managing broker, and property manager with almost two decades of experience in real estate. Mark found his way into real estate by purchasing and flipping condominiums prior to the great recession, and since, he has built his own portfolio of rentals alongside co-founding GC Realty & Development LLC (GCR&D), a full-service real estate brokerage, property management and investment firm, and GC Realty Investments (GCRI). He has rehabbed and stabilized over 450 properties and currently manages over 900 investment properties throughout the Chicagoland area. Mark was featured on CNBC’s TV show The Deed, which chronicled one of his rehabs. He has also been featured on podcasts like The BiggerPockets Podcast, The Real Estate Mogul Podcast, Joe Fairless, REI Diamonds, and Positive Phil.

    David Krulac from Mechanicsburg, Pennsylvania
    Replied almost 4 years ago
    Mark, I tried to put #2 to rest with my book, “How I Started With Nothing and Made $12 Million” and my Bigger Pockets Podcast # 82 I started literally with nothing and bought the first 11 properties essentially nothing down, because I had nothing to put down. David Krulac
    Cynthia S. from Charlotte, NC
    Replied almost 4 years ago
    Hi Mark, would you share some light on how to get my first deal with no money. I lost 2 offers to cash buyers both within a few months. My last offer for a two unit included a preapproval for financing from a bank. Included in the offer was a copy of a check for the down payment but the cash buyer won out. Thanks.
    Mark Ainley Developer from Roselle, IL (Chicago Suburb)
    Replied almost 4 years ago
    Your situation might be a little different in having financing in place but competing against cash deals? We deal with that even as cash buyers going against other cash buyers. For us it comes down to having relationships with the local listing agents especially the REO brokers. If you are working with an agent you can have your agent help you with this and pay your agent a commission separate from the deal. To ensure you get the good deal you want paying your agent separate is most likely worth it to make it happen.
    Ken
    Replied almost 4 years ago
    Mark – How can the agent help with this? I do not understand how paying extra to my agent helps get a deal against competing buyers. – Thanks
    Cynthia S. from Charlotte, NC
    Replied almost 4 years ago
    Thanks. I will talk to my agent to see if there’s some influence she has in getting my offers accepted. I still think I would be in a better position if I could go in with cash vs financing, especially if the property is a short sale or REO. I just need to know How to become a cash buyer.
    Ken
    Replied almost 4 years ago
    Mark – How can the agent help with this? I do not understand how paying extra to my agent helps get a deal against competing buyers. – Thanks
    Jose Beltran III from Canyon Country, California
    Replied almost 4 years ago
    Hello David, That’s incredibly inspiring! I will definitely be watching your podcast and picking up your book!
    Larry
    Replied almost 4 years ago
    Don’t know if I agree that rehabbing on dozens of weekends is more stressful than rehabbing in three weeks. I rehab 20 homes and none of them less than six months. These were my winter months projects. No hurry. I get done when I get done. If I get tired I leave and lock the door. I did everything myself ( except roofs) overall the jobs were as perfect as you could get. and what I didn’t know I read books or went to Home Depot classes. I made a few errors but overall the work done was as good as any contractor. You might call this “hobby Investing” There is money going out of my pocket during rehab and none coming in. This is quickly recovered when rent starts coming in. Now I retire early from work, have no heart or stress health issues, and have a good income from houses with only a few mortgages left to pay off. I read cruise ship brochures now rather than a how to install a bath room book.
    Mark Ainley Developer from Roselle, IL (Chicago Suburb)
    Replied almost 4 years ago
    Larry, I see your point but often investors have a time line they plan for and doing it all themselves is the first set up of not making those deadlines. They may have money to payback, paying high interest rates, or need to beat the slower time of year markets coming up in the months ahead and that is who my thoughts are geared to. Hope that makes sense!
    Don Alberts from Frankfort, Illinois
    Replied almost 4 years ago
    Mark again thanks for your expertise in sharing this information. Have a great day. Don
    Kyle Hipp Investor from Appleton, Wisconsin
    Replied almost 4 years ago
    Who says you can only work on weekends. I work shift work aND still work on my projects everyday. I usually take about a month for a full house largely by myself. The key is 4-5 hours of sleep a day 🙂
    Joaquin Marte from Philadelphia, Pennsylvania
    Replied almost 4 years ago
    Great Post Mark Keep them
    Joaquin Marte from Philadelphia, Pennsylvania
    Replied almost 4 years ago
    coming
    Tanya Bacic
    Replied almost 4 years ago
    Hai MARK AINLEY, I Have asked a question for you. Will these 3 myths helpful for beginner level investors ? I think ,it is very discouraging to real estate investors. Also I thanks to sharing this blog.
    Mark Ainley Developer from Roselle, IL (Chicago Suburb)
    Replied almost 4 years ago
    Tanya, these are common subjects that we see individuals that are new to real estate allow to become road blocks. I can make money fast wholesaling so should start there, I need money to get going, and I can save by doing it all myself. The goal here is to encourage and not discourage by showing the 20,000 feet point of view thru what we have done or seen over the last 10-15 years.
    Mark Ainley Developer from Roselle, IL (Chicago Suburb)
    Replied almost 4 years ago
    Ken and Cynthia, Feel free to reach out privately if you want to speak briefly on the strategy we have used off an on for years that helps us get the properties we want even when competition is tight.