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Misconceptions or myths in the world of real estate investment are too easy to come and have at times resulted in investors’ making big mistakes. Many times they have even stopped some people from getting started at all.
Amongst the many others, a major consideration for people before investing in real estate industry is “Money”. It is said that money can be the biggest motivator for letting people invest in real estate or lack of funds can even stop people from making an investment. Whatever may be the reason, but money plays a crucial role in real estate business.
However, there are many myths regarding the role of money in real estate investment. A few of them are discussed below:
Myth# 1: Real Estate is very risky. I fear losing money initially
Truth: When invested wisely, real estate investment is a calculated risk that education mitigates.
Unlike gold prices or stocks, real estate can be well controlled, rather blindly assuming that things will work well and another one year will be good.
However, there are some things which are not in anyone’s control. But it is always advisable to learn and learn more and educate yourself well so that you are thoroughly equipped to take a calculated risk.
Even beginners, if they do their homework properly, aren’t automatically guaranteed to lose money.
Myth #2: I need a lot of money before I can start investing.
Truth: You need to adopt creative ways to finance, lots of money is not required always.
Investing is not similar to buying a house. It’s like generating a passive income source that will later on help you to pay for the property you have purchased. It’s not necessary to have a lot of money for making an investment. You can even pool-in with some partners or private money lenders or can resort to some other financing routes that will help you get started. No doubt there are costs involved for this, and it is advisable to have extra cash to cover for the exigencies, but being rich is not necessary. If the college students can do, why cannot you??
Myth #3: A good credit is required to make an investment.
Truth: Alternative financing is another good option.
Financial dependence on the bank for getting a home loan sanctioned in order to buy an investment property is not just the only solution. As mentioned earlier also, there are several other options available like partnering with investors having good credit, borrowing cash from private lenders and crowd funding platform, etc. for investors having limited resources or falling short of credit.
So, you can still make an investment while restoring your credit to good standing.
Myth #4: Post-foreclosure crisis housing market makes little money
Truth: Finally, what matters is the generated cash flow and not the home price.
If the foreclosures are down, people assume that the time to make an investment is over now. But when the foreclosures are left and right, it is a profitable time for the investors.
Today, cash flow is very important as compared to the price of the home. As an investor, you can make plenty of money as what ultimately matters is how the price of the property balances out with your monthly cash flow.
Myth #5: Good deals are most important. I should give priority to getting the cheapest properties.
Truth: It is not just the cost of property but there are several other factors which are crucial for making a good rental property.
Getting cheap and inexpensive properties might seem to be a good deal initially but later on can turn to be a nightmare also. The issues that arise are that the properties might come with a lot of hidden problems which need to be fixed later on to make them look presentable. There are some which may take a lot of your time, money and efforts and might eventually increase the vacancy time also.
To add to your woes, if the quality and location aren’t satisfactory, the rental amount charged won’t be able to cover up the same.
So, cheap isn’t always beneficial. Talking about long-term time frame, buying cheap and dumpy property will not do any good favour to you.
Myth #6: In order to maximize the cash flow, one should focus on cutting costs.
Truth: But not by keeping the quality and condition of the property at stake.
It’s important to be smart with your money. Smart money management and frugality is required in this business. In order to cut down on short-term expenses, one must not compromise with the long-term value and condition of your property.
Repair things right on the very first time rather going in for quick fixes in order to save cost. Hire quality and trustworthy people to take care of your property and as your tenants.
In property management and property repairs it is of utmost importance that you don’t cut down on the costs. In case the amount being spent is not worth the cost, then you just hurt yourself by doing the other way.
Hence, in order to have an excellent realty investment experience, one can opt for a turnkey real estate investment company which is well-known for its quality.
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