Are you curious about the most prevalent misconceptions in property investment? Then, stick around; we’re debunking the 10 most common real estate myths below. Whether you’re a newbie or a long-term investor, you can always learn a thing about the industry. After all, knowing the reality of the real estate market can help you avoid pitfalls. Additionally, Bay Property Management Group suggests doing your research and setting investment goals, so we’ll discuss realistic expectations for investors.
Table of Contents
Common Real Estate Investment Myths
1. You Need a Large Amount of Capital to Get Started
This myth is one of the most prevalent on the block. Yes, real estate is a capital-intensive venture. However, that doesn’t automatically translate to being cash-heavy. There are other ways to become a property owner with small capital. For example, you can take out a low-interest loan with a 20% down payment if you have good credit. Also, there are less expensive real estate investment options like REITs.
2. Real Estate is a Strictly Passive Investment
One of the reasons real estate is attractive is that it offers landlords the opportunity to earn while doing nothing. But, in truth, that only applies to investors in REITs. Being a property owner is a demanding job, and if you don’t outsource to staff or use property management software, it can feel overwhelming.
3. Urban Areas are Always More Profitable
Investors always want to make the most out of their investment, and at first, buying a home in the city might seem more lucrative. However, such property is often more expensive, with considerable maintenance costs and taxes that eat into your profit. If you check rental market projections, you’ll see suburban areas are recently growing in popularity. In other words, their property owners are also seeing valuable returns.
4. Buy-and-Flips are Easy to Do
Transforming a fixer-upper into a luxury condo isn’t as easy as it looks on TV. It takes about 3 – 9 months to flip a house and a few more to sell it. In addition, you’ll have to deal with several contractors and interior decorators that require time and cost money. Thus, think of house flips as a calculated short-term investment rather than a fast and easy cash grab.
5. You Need to Be a Homeowner First
No rule stipulates you have to be a homeowner before investing in a rental property. On the contrary, some investors find it more affordable to rent themselves while tending to tenants. Although that excludes them from taking advantage of financing like home equity, it’s certainly not a prerequisite.
6. Real Estate is a High-Risk Investment
First off, it’s essential to know that no investment is 100% risk-free. Real estate tends to tip toward the lower end of the scale. It’s notorious for hedging inflation and retaining value through the years, making it perfect for low-risk investors. In comparison to stocks, it undoubtedly fluctuates less.
7. You Can Become Successful Overnight
Another myth we have to debunk is that you can become successful overnight. Some people think that you can hit the jackpot if you time the market right. On the contrary, real estate is a long-term game, and the patient reaps the most benefits.
8. Scheduling an Open House is a Waste of Time
Some people believe that hosting an open house is a waste of time. Well, this couldn’t be further from the truth. After all, showing a place to multiple people and choosing only one seems like a low return on time. However, most prospective tenants need to see a home before committing. You can always use a video tour to narrow your prospective applicants to people who enjoy the virtual show.
9. Always Invest Close to Home
Investing in your hometown can give you a leg up in real estate. Knowing the ins and outs of an area would undoubtedly come in handy during location search, pricing, and performance prediction. However, you don’t always have to play it close to home. With the help of an expert agent and diligent research, you could expand your portfolio to more profitable areas out of state.
10. Being a Landlord is Hard
This myth has some truth because being a landlord can be challenging. But, it’s certainly not the whole picture. For the most part, owning property can be a breeze if you have the right team. Many landlords outsource duties to real estate agents, contractors, lawyers, and property managers. Property managers are instrumental as they oversee the day-to-day runnings of your units.
Facts about Real Estate Investment
● The Market Will Continue to Expand
As long as people require housing, the real estate market will grow. Future projections see the US housing market expanding rapidly as the population increases and the economy becomes more steady.
● It is a Popular Retirement Plan
Investing in property has many advantages, including high returns, edging inflation, and exercising control. For those reasons, it is a popular retirement plan. Besides, the ability to outsource most of the demands makes it more accessible.
Realistic Expectations for Investors
● You Don’t Need a Lot of Capital
As we highlighted earlier, you don’t need considerable capital to invest in real estate. Instead, you can acquire a house through loans, seller financing, or HELOC and start earning rent.
● Real Estate Requires Careful Planning
Yes, real estate is a low-risk investment option. However, you can still lose money if you don’t have a viable strategy. In addition, investing in property requires some time, effort, and aid where necessary for the best outcome.
That’s it! The 10 most common real estate myths debunked. We hope we’ve disproved some of the false notions you held about the industry and are now more aware. You’ll find that it’s more profitable to approach investment with the truth and correct expectations on your side. Also, it’s much easier when you have expert professionals to guide you through.