Don’t Fall For These 6 Real Estate Investment Money Myths!
There can be many misconceptions in the world of real estate investment. Some misinformation stems from what we think seems like common sense—it just seems logical; therefore, we don’t stop to think about how it actually is. Or possibly after years of bad information being passed down, we never quite stop to do our own research because we assume a method is tried and true for a reason. No matter the case, there’s a lot of financial advice out there that have caused many investors to make costly mistakes.
Unfortunately, these misconceptions have also stopped some investors from getting started at all!
Money is one of the biggest obstacles when getting started in real estate investment. For many of us, it’s the key motivator for getting involved in investing in the first place. Whether it’s an early retirement, securing finances for your children and family, or dreams of leaving your day job for financial freedom, money plays a primary role in your investing goals.
With that said, we’re here to address a few of these financial misconceptions so that you can be more successful and better prepared for real estate investing!
The Truth About These 6 Real Estate Investment Money Myths!
Myth#1: In the beginning, I'm going to lose money no matter what. That's the risk you take with real estate.
Truth: It’s a calculated risk that education mitigates.
Yes, there’s risk to real estate, but unlike stocks or gold prices, is well within your control. You’re not blindly hoping things will go well and hoping for a good year.
And it's true that even in real estate, some things aren’t in your control. However, you have active agency in your investments, where they are, and the decisions you make to improve your returns. But what if you make wrong choices? That’s all part of it! The more you learn and educate yourself, the more you’re equipped to take that calculated risk.
If you do your homework, it's very possible that even as a beginner, you'll still come out on top of your first investments.
Myth #2: Before I can invest in real estate, I need a lot of money.
Truth: Not really; and there are creative ways to finance.
Purchasing real estate can be intimidating, and you may think you need to have a lot of extra cash to get started. However, investing in a property isn't like home ownership. Your investment will be generating passive income that will, over time, pay for itself.
Additionally, there's always the possibility of working with a partner, private money lenders, or other alternative financing options that you can consider as well. And yes, there's going to be a cost involved, so it's wise to have funds to cover for contingencies. But you definitely don't have to be 'rich' to get started in real estate investing.
Myth #3: I need to have great credit to invest in real estate.
Truth: Alternative financing options means you don’t.
When I talk about alternative financing, this means that you don't have to depend on getting a standard bank loan in order to secure your first investment property. You can always borrow hard money from private lenders, partner with other investors who do have good credit, or even getting started through a crowdfunding platform. There are lots of ways for struggling investors with limited resources and bad credit, but there are definitely ways to invest while you work on restoring your credit.
Myth #4: There’s less opportunity in a post-foreclosure crisis housing market.
Truth: Ultimately, the generated revenue, not the cost of the home, is what matters.
Not too long ago when there were foreclosures seemingly everywhere, investors were able to swoop in and snatch up these properties by the dozens. And who can blame them? They were good, lower cost homes and there were plenty of them! But now that the market has changed, some seem to think that they've missed their big opportunity.
And unfortunately, these same people usually think that investing in the real estate market should only be done when it's easy.
What many need to understand, is that the price of a property is not what's most important. How it balances with your monthly cash flow and generates revenue is. There's a lot of opportunities still out there for real estate investors, as long as you are doing your due diligence, there are big returns to be made.
Myth #5: The best thing I can do is find cheap properties, it all starts with a good deal!
Truth: There are more important factors that make a good rental property.
While cheap properties can be an awesome deal, they can also be an investor's nightmare. The issue is usually that these 'good deals' come with a lot of hidden problems that you end up having to fix. Bottom of the barrel properties may have good bones, but there's typically a lot of work just to get them not only looking presentable but making sure any major issues are addressed as well. It's a 'good deal' for a reason, and that's because there's a lot of time, money or both to be spent on getting the property up to quality rental condition. Additionally, big fixes can cost you in vacancy time too.
Aside from the actual property itself, you also want to consider location. A cheap house in a bad location means you won't be able to command top dollar for your rent. Further proof that cheap properties don't always make for better cash flow!
Myth #6: Cutting costs will always maximize my cash flow.
Truth: Not if you're minimizing your property’s condition and quality.
Unfortunately, this is the kind of thinking that creates slum lords. It's one thing to be smart with your money, and being smart with your money is a great trait to have in any business. But what's not good is cutting costs at the expense of your property's long-term value and condition in order to save money over the short term.
Quick fixes never work, so repair things right the first time, even if it costs more. Make sure that the people you hire to take care of and fix your property are reliable and of good quality and reputation. They'll be sure to take care of your property and your residents, meaning more peace of mind for your investment.
Overall, don't cut corners where it really counts. There are plenty of ways to save money when you're investing. But there are times when instead of saving, you're hurting your business and yourself by cutting down on costs. So when it comes to property management, repairs, and even the house, make sure you're using your best financial judgment.
If you want excellence in your real estate investment experience, choose a turnkey real estate investment company known for quality.