Personal Development

8 Real Estate Investing Myths That Hold Investors Back—Busted

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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investor-myths

See through these myths about the real estate industry, and you’ll be able to get started faster and make your investments more profitable.

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There are too many myths and misconceptions about investing in real estate today. Some hold would-be investors back from getting involved and sabotage their potential. Other misconceptions lead investors to make serious mistakes. Here’s what you should know.

8 Real Estate Investing Myths That Hold Investors Back—Busted

Myth #1: It’s just like TV.

Reality TV shows have been good and bad for real estate. On one hand, it has raised the visibility of investing and has inspired many to get involved and enjoy the rewards. Still, while shows like those on HGTV display some of what goes on behind the scenes, they don’t show everything. They do not show you how to set up LLCs, find contractors, etc. They often make it seem too easy. There are important steps in the setup, and there is often more to the net numbers. These things are vital for investors to be aware of.



Related: 7 Myths About the Real Estate Professional Tax Status, Debunked

Myth #2: You have to fix toilets.

One of the biggest turn-offs to investing to some is manual labor like having to fix toilets. While this may be the case for some landlords, it doesn’t apply to everyone. There are options for investing passively and in a hands-free way. Some find hands-on rehabbing and maintenance highly rewarding and love it. Or you can have other people take care of maintenance and simply collect the rents. You really no longer have to do anything you don’t want to.

Myth #3: It’s quick and easy.

One of the biggest attractions to real estate—and one of the biggest myths—is the lure of making fast and easy money. It is true that real estate investing can generate more money faster than just about anything else. Some jump in and see great success quickly. Not all sustain that, unless they have a smart business model. For others, it is a slower road. There is nothing wrong with that. What is important is having realistic expectations and building in sustainability, so that you keep what you make.

Myth #4: You need a lot of money to get started.

Some real estate investment strategies and opportunities do require a lot of money to get into. Some promote “no money down” tactics, which can often be tougher than they’re made out to be. However, there are viable opportunities that require a little money and that can be accessible to just about anyone. Don’t let assumptions that you need a lot of money prevent you from getting started. Research your options.

Myth #5: You have to be old enough.

I still hear this from time to time: “How old are you again?” You don’t have to be a certain age to get into real estate. You can start at any age—and the earlier the better, in my opinion. No matter how old you are, there is a way you can get involved. Why go through years of working in the rat race when you can just jump to owning your own business and having investments pay for your lifestyle? At the same time, you are never too old either. Don’t let that be an excuse to keep you out of the market.

Myth #6: Raising rents will force tenants out.

One of the financially crippling myths is “if I raise my rents, my tenants will leave.” This is not the case. This is a scared investor talking. I once purchased a house with an inherited tenant who had been paying $295 a month for 20+ years. The fair market rent was $700 per month. Talk about a scared landlord! If you properly train your tenants and increase in increments every year instead of making huge jumps, then it should not be an issue. Know your local landlord-tenant laws and how much you are able to raise the rent each year. Then plan on consistently lifting those rents to maintain your profit margin as inflation increases your expenses.

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Related: Multifamily Myths: Why You Don’t Control The Value Like Everyone Says You Do

Myth #7: It will be passive.

How passive real estate is for you really depends on the strategy you take. Often people believe you acquire a property and the checks just come rolling in. This is not the case. You have to treat it like a business, and that will take some work on your end. Most of the landlords that my partner and I purchase properties from have found this out the hard way.

Myth #8: The market will always go up.

Over time and in the long run, real estate generally does increase in value. It is also cyclical and can be a rollercoaster ride at times. In the run up to the crash, most people bought properties because they just assumed it was a sure bet that they were always going to go up. Unfortunately, that did not turn out so well for most people. There are always smart opportunities to invest, but choose wisely.

Summary

There are many myths and misconceptions about investing in real estate. This can be really harmful for those who aren’t alert to the above points. Real estate is one of the best—if not the best—way for many to get and stay ahead financially. Profitability will rely on you busting through these myths and taking smart actions.

Investors: Which of these have you encountered? What would you add to this list?

Be sure to leave a comment below!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded Sonder Investment Group, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to wholesaling and scaling a business.

    John C. Investor from New York, NY
    Replied over 2 years ago
    Good reminders for all of us
    Dawn A. Rental Property Investor from Milwaukee, WI
    Replied over 2 years ago
    “Myth #6: Raising rents will forced tenants out.” Shouldn’t the word be “force” not “forced”?
    Allison Leung from Denver, CO
    Replied over 2 years ago
    Good call, Dawn! Corrected. 🙂
    Whitney Tutt Investor from Mableton, Georgia
    Replied over 2 years ago
    I agree, great reminders! Thank you!
    Soddee R. Investor from Oklahoma City, Oklahoma
    Replied over 2 years ago
    Great points!
    Robert Collins Rental Property Investor from Douglasville, Ga
    Replied 6 months ago
    I’ve encountered all of these myth before, you hear this & that. You have to do your own research and calculate risk and make it your job to connect with other investors that are doing the same thing you want to do but on that level you want to be and study their best practices. Something I would add is , people thinking it may be cheaper to just buy land & build new property as an investment. You have to know a lot goes with that & a lot of time this is a at the top of the market retail piracy& it will be very difficult to get a great roi but not impossible if your connected with the right people , maybe like a seasoned developer.