Investing in the real estate market is a big decision and requires a lot of commitment. Whether you are buying a home or purchasing another property, suitable for renting, investing in real estate requires a careful approach. Months of researching and accumulating knowledge can easily be blurred by false perceptions or myths about investment, and it can be hard to separate facts from fiction. Let’s take a look at some common real estate investment myths that might confuse someone who is thinking about taking the first step in investing.
You need a lot of money to start investing in real estate
You don’t necessarily have to be rich to buy a property, there are many options to get enough money for the deposit only, like a mortgage or a loan from banks customized for first-time investors. There are options like syndication deals, partnerships, etc. With numerous flexible and adjustable payment schemes, property investment has become easier and more affordable than before, and people from various socio-economic classes can easily find the best payment plan. In most cases, you have to pay around 20% of the property value and the home loan covers 80%. In the end, you can generate the passive income that will eventually pay for the costs of the property over time.
You have to own a home first
Many people believe that you have to own a residential property before you invest in a rental property. That’s not true! A lot of young people buy and rent properties to increase their income, while they are still living in a rented place or with their parents. Buying a property that you will call “home” is more difficult than buying a rental place. Why shouldn’t you have an excellent source of income while you’re looking for your “dream house”? There’s another option, in fact, you can buy a property that you can live in and rent out at the same time, like a duplex.
It’s a high-risk business
Well, let’s be honest, any business comes with some degree of risk, but believing that investing is extremely risky is one more of the real estate investment myths. Indeed, you never know how successful your rental property will be, but if you carefully plan everything, it can generate a stable income every month. No investment is risk-free, but investing in real estate offers more benefits than other investments, including having a place to live, and a monthly income even during periods of economic downturn. Compared to stock prices, real estate prices are in the investor’s control. When you are selling the stocks, you know the price for today, but can’t guess the price for a year from now. It is much easier to estimate the worth of a house after the renovation, for example.
Being a landowner is time-consuming and requires a lot of work
Maintaining a successful business in the real estate industry certainly requires involvement and commitment, but that applies to any other business. There are many disadvantages of self-managed real estate properties. When you are a property owner, you have to worry about finding tenants, property maintenance, taxes, insurance, and much more. Many people think that once you become a landlord, there’s not much time left for anything else. However, there are plenty of benefits to hiring an apartment management company. If you hire a professional Manhattan real estate management agency to help you, like a trusted property management company, you’ll save a lot of time and, more important, money. Outsourcing is a convenient way to do things, and it’s safer than doing everything alone. Also, there are real estate investments that can generate completely passive income.
You don’t need a real estate agent
Of course, you can sell or buy property without an agent, but why would you put yourself at such risk? Many people underestimate the usefulness that an experienced expert can bring to them. A professional agent is obligated to put your best interests in the transaction and help you get the best deal considering the current market conditions. People tend to think that agents will always try to trick them, but the truth is the opposite, their best interest is your best interest too.
Property prices always increase
This is another of the real estate investment myths, but you should know that the property market has periods of booms and periods of declines. The prices increase and decrease like in any other market, depending on the economy. At least, you don’t have to worry that your real estate investment will lose all of its value or decrease to zero as can happen with stocks. The real estate market can sometimes crash and drag the prices down, and these periods are not good for selling properties, but if you’re looking for a purchase, this is your moment. To give yourself the best chance of profit gains, you should also consider the location. Buying a property in an area that is likely to grow in the future is always a good investment.
Profit is quick and easy
One of the biggest preconceptions about investing is that it’s a quick and easy way to gain profit, especially by buying fixer-uppers, just like in popular TV shows. Buying a ruined house and fixing it is not an easy job, it requires a lot of researching, cost calculating, hiring electricians, plumbers, accountants, etc.
House flipping can be a good strategy if it’s done properly, but it’s important to know that you shouldn’t pay more than 70% of what the property will be worth after repairs, to avoid any potential market fluctuations. Be realistic and patient when it comes to expected returns. Both fix-and-flip and rental properties require a carefully calculated approach, although investing in rental property is a long-term investment and not so affected by market downturns.
There’s no perfect time to invest in the real estate market because the timing is not the same for everyone. You should consider several factors before investing, like your financial stability, living situation, familiarity with the market, etc. Putting in a little more effort and learning about some real estate investment myths can bring significant results. Keep in mind that researching can take a couple of months before you make the right decision. Good luck!