saving and investing

Real Estate Investment Myths Exposed

The real estate industry has started to gain the attention of investors. People used to put their hard-earned money on stocks, mutual funds, or bonds. But, they saw the unpredictability of such investment types. Also, the learning curve of such investment types is wide. Thus, they looked for a more tangible way to invest which led them to real estate.

The popularity of the real estate industry among first-time investors soared. But, there are still some big misconceptions surrounding it. For a person to be successful in this field, they have to be aware of the common myths that they have to avoid. Here are some of them.

Myth # 1: You Must Invest Close to Your Home Town

As a real estate investor, you may have heard that you need to choose properties close to your home. There may be some merit to this belief. A property that sits in the same town as your home is easier to manage. You do not have to worry about adding the travel time to your many concerns as a novice investor.

But, you cannot always adhere to this idea. There are real estate properties that may be out-of-town or even out-of-the-state that are more lucrative. These rental properties may be in communities that buyers prefer. Also, your local real estate market may not be your best bet if it is more expensive than other markets. You have to weigh in some factors in choosing the location of your real estate investment.

Myth # 2: You Need Great Wealth to Get Started

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Like any other investments, you need to have some capital to start with. But, it is a misconception that you need lots of it. There are many ways on how you can start growing your portfolio in the real estate industry.

One of the most famous strategies is house hacking. In simple terms, this is buying a multi-family home and living in one of the units. Another option known among first-time investors is house flipping. It is buying a fixer-upper and selling it once you have renovated it.

You can also look for financing options such as the ones sponsored by FHA and VA. Crowdfunding and hard money lenders may also give you a good start in the real estate field. Foreclosed properties and those in the auction are also choices you may consider.

Myth # 3: Real Estate Investments Are Passive Income

In the strictest sense of the phrase, passive income means you earn without doing much effort. Real estate investments are sometimes considered as such. This is because of the monthly rent you get out of them. But, you cannot sleep on it and expect a continuous cash flow.

Maintaining a property or properties is hard work. You have to make sure that everything is in running condition. Keeping cordial relationships with tenants is another facet that you need to master. Bookkeeping is another must-have skill. Being a good landlord may demand some of your time and skills for you to ensure a good stream of income.

Myth # 4: House Flipping Is a Piece of Cake

Home improvement shows gave an unrealistic hype about restoring fixer-uppers. They also made DIY projects on simple houses look so easy. Some first-time real estate investors bank on these notions as they start their path. Though house flipping could be a lucrative strategy, it is not as easy as it looks.

You must weigh-in some pros and cons with this scenario. Look at the costs of renovations and your time and effort. Compare all these factors against your profit when you sell the refurbished property. It is only then that you would see if a particular house flipping project is worth it.

Myth # 5: DIY Maintenance Could Help You Save

This myth once again has its roots in all the glossy reality TV shows that are prevalent nowadays. It shows homeowners or property owners handling a power drill like a pro. This does not always work in real-life situations. As a prudent investor, you must know when to draw the line between DIY projects and professional work.

Most of the time, DIY projects are for aesthetic purposes only. Changing some fixtures or applying a fresh coat of paint is easy enough to do. But, dealing with plumbing, structure, or electricity is better left with professionals.

Having a clearer perspective would help first-time investors to lay down their strategies. Misconceptions could discourage them or impede their progress in the real estate industry. Demystifying common myths would allow them to grow their portfolio.

 

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