3 Common Misconceptions About Real Estate Investing Newbies Believe

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Time and time again, due to the age-old troublemaker known as word-of-mouth communication, these highly common misconceptions regarding real estate investing cause some serious financial heartache. So, even if you aren’t a beginner, I think that you should definitely take a look through this article to avoid having to be tricked by these sneaky misconceptions ever again.

How to Invest in Real Estate While Working a Full-Time Job

Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.

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3 Common Misconceptions About Real Estate Investing Newbies Believe

Wholesaling is Where Newbies Should Start

It has been said so many times over the years that many of us probably think that it is true now. However, wholesaling is not all that it seems. Everyone gets told how simple wholesaling is and how profitable it can be. While it is true that you can make a good living with wholesaling, I must repeat that it is not easy. It requires a truck load of hard work, effort and organization. Not to mention, technically, wholesaling doesn’t really fall under the real estate investing umbrella.

tax-efficient-business

So unless you really enjoy it, are extremely good at it, or are getting a nifty return on your time and effort (not the money spent investing), don’t simply jump on the bandwagon just because everyone else around you is doing it or because it sounds fancy and you are hoping that it will make you a millionaire overnight. Stay true to yourself and what you have a deep passion for. 

Related: 15 Things Every Newbie Needs to Know About Starting a Business

Being a Good Landlord is Necessary to Being a Good Real Estate Investor

Being a landlord does not automatically make you a great real estate investor. I strongly believe that you should only be a landlord if you truly enjoy the handy work and definitely not because you want to save that extra $100 a month. This is simply because your time is precious — any good investor knows that.

After all, if you don’t plan on becoming a full-time property manager or a handyman in the future, why put yourself through all this trouble when you should be focusing on how to increase your passive income? In my previous article here, I talk about how I made the mistake of managing my own properties when first starting out. Now that I have a PM company, it allows me to focus my time on higher value activities. 

Related: What All Newbies Should Consider BEFORE Choosing a Real Estate Niche

You Need to Be Wealthy to Begin

People often believe that in order to begin property investment, you have to have a load of cash in your bank account before you begin. However, I am here to tell you that it is simply not the case. Real estate is extremely lucrative, and many of the top industry leaders are good at using other people’s money to operate their businesses.  

newbie-strategy

Most successful real estate owners start off small, then slowly work their way up into bigger and bigger investments. So don’t freak out and think that you should avoid real estate investing if you don’t have millions. After all, many great investors start off small and carve out their own path to success from there. As you are aware, success in this industry doesn’t happen overnight, so be patient and be ready to make the slow climb one step at a time.

What other misconceptions are out there? Newbies, have you found the above to be untrue?

Leave a comment below!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record

23 Comments

  1. Aaron B.

    Sterling that was a great article. I would add one from my own experience: if you are inexperienced you will not have obtained enough education within one or two months to have minimized your chance of a less than desirable outcome. Good luck on your Wolrd Record quest.

    • Sonia Spangenberg

      Aaron that is a great. I know when I first started my education process about 3 years ago I was beating myself up because I wasn’t making things happen as fast as they were saying I could. I ended up not buying my first property until about the two year point and I a. m grateful that it rolled out that way. I would not have been ready to handle some of this. I also now have a partner and we each have differing strengths that are complementary. We both agree that alone we each would not have been ready to handle what we are now doing. We are on our 3rd property BTW. But that two year period I was consuming every bit of info I could. I was going regularly to my REIA, reading Bigger Pocket blogs and attending the classes I signed up for. We have still made some mistakes because we are new, but without the education we would have made much larger mistakes. You do have to just jump in at some point and expect that you will have some mistakes (tuition) along the way as you continue to learn. I think I have heard many an old time investor say they continue to learn.

  2. John Barnette

    It’s easy. Well it becomes easier the more experience you have, pre-screening tenants, efficiently dealing with repairs, etc. BUT it is not easy to be an investor/landlord.

    You will get midnight calls of exploding toilets or something along those lines. Have been a landlord and manage them myself since my first in 1997. Yet to get one of those calls. But do tend to take care of my properties as well. And totally possible I will get one someday. My advice…don’t let that common story or fear keep you away from residential investment.

    Get rich quick…um generally not unless you have the timing and appetite for risk. I have for sure made a fast buck…Lots of them on a few outstanding flip deals. But fate of getting those deals was result of many years working in real estate, setting myself up for good luck to get in my way, taking risks that many would not, and the crazy price swings of the San Francisco market. I like to think “educated and experienced gambling or speculation” just like when in of those professional poker players with LOTS of experience knows when it is a good risk/reward bet to go BIG.

  3. Douglas Skipworth

    Sterling, once again I agree with the points of one of your articles. Great job!

    You are right that you don’t need to be wealthy to begin. In fact, you don’t even have to have perfect credit to get started (but it sure helps!). Hard money lenders and other alternatives can open doors for even the most tarnished of credit scores.

    That said, eventually you’ve got to get to great credit if you’re going to be a long-term buy and hold investor. But, you don’t necessarily need it Day One.

  4. Henry R.

    Hey Sterling,

    One of the hardest things for me has been getting that first rental or flip. As far as the rental goes, missed one by 2k higher bid, one to a all cash offer and one the Re agent never got back to me on what happened. Also agents ( the few I have worked with) don’t get back to you in a timely matter and sometimes you don’t even get to view the property and the next thing I know it’s pending!
    Last week I found 3 vacant properties, left notes got a call back on one. The couple is splitting up and the husband gave my info to the wife ( she must own it) so far nothing.
    I know that’s how it goes, but I have been trying to find something for 2 yrs now. Sometimes I take a break from it because I need to. I became a pro member last year to try something different and even tried yellow letters, and they did not do what they said they would do, my list of non-owner occupied homes was a mere 3%, not cool at all.
    I know I need to make more offers, but when you only can find very few that are worth making offers on what else can/should I do to increase that?

    Thanks
    Sorry for the long post.

    • Sterling White

      You just have to stay persistent Henry. Besides doing offers are you doing your own marketing to acquire properties? It will be a numbers game and lots of action to find the property that is right for you. At the same time you will have to be patient in this industry. You got it Henry!

      Now go and be great!

  5. Great read Sterling!!!…Definitely, being a real estate investor takes persistent, evaluating the numbers, and understanding the power of leverage. I am a buy and hold investor in this good rental market. I purchase both B-class residential houses and apartments to maximize on cash flow and equity capture. I believe in the motto “Best Product-Best Price”. When I purchase a property, I rehab and fix everything, which minimize future repairs. I properly screen tenants to place the best tenant in the property, which minimize turnover. All of my residential properties are locked down for 2-years. The US is truly becoming a rental market for years to come. I love the beauty of passive income. I set-up systems where I work on my business not in my business I am able to live a lifestyle of being in the moment with financial freedom 🙂

  6. Great article!

    You really do not need to have a lot of money to get started. My first property income property was bought when I had only 4% as a downpayment and borrowed the rest against my own home. From there it just got simpler to keep buying and now today I am looking at my 4th and 5th units.
    On another note having a property manager is the greatest load off your shoulders you will ever get in this business. The trick is to find a good one!

  7. Vincent Charleston

    This was a great article Sterling! I am a newbie myself with limited credit, and I have been hearing both sides of the wholesaling argument. I have talking to some that are for wholesaling, and I have talked to some that are against wholesaling. Though I have been reading about it, and getting as much advice as I can before making a final decision and jumping into it, I have been considering both sides of the wholesaling argument. I have also been looking into the note industry as well. What advice other than what you presented in this article would you have for someone like myself who is getting as informed as possible before making the jump into a real estate niche? What good starting point would you recommend?

  8. Sterling White

    The best starting point would be taking action and start where you are now. Find someone who is already doing what you would like and offer to help them(for free if needed). You can then learn the ropes of industry firsthand.

    Hope that helps

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