The word on the street, as you may have already heard, is that real estate investing is the most lucrative means of earning passive income. For many years, the real estate industry has been seen as one of the sectors with high returns and low risks. As an investor, however, there are so many questions you would want to be answered before you make any investment decision. Speaking to a real estate agent or browsing through the internet will most likely be fruitless as you will end up with the most common myths that are more of a trap for you to quickly put your money into a business blindly. In this article, we debunk some of the most common real estate investing myths. Are they really true or are they simply easy bait for hungry investors?
1. Making Money in Real Estate is Quick and Easy
Most real estate experts will tell you that once you have your property ready, you can sit pretty and watch money trickle in fast and effortlessly. The truth is, the real estate industry is truly promising and profitable – you will realize this as you delve deeper into the numbers. However, just like any other business, certain factors weigh in on the results and profits. Real estate is profitable, but before the smooth sail, you will need to be patient through the storm. You will also need to invest a lot of money in order to make a profit in the long run.
2. You Need a Lot of Money To Invest In Property
The second myth is that you need a lot of capital to be able to invest in real estate. Investing in real estate requires digging deep into your pockets. However, if it is an industry you are passionate about and have a serious interest in, there are many ways to go about it. You can, for instance, partner with someone with a stronger financial muscle. You can get a loan, or you can start small by investing in what is within your financial ability. You can also invest in a fix and flip. The options are limitless; you just need to look beyond the challenges.
3. Land is Scarce
Real estate experts and salesmen always use this myth when explaining the incredibly scarce resource that is land. An ever-increasing population is also said to have made this situation worse, and as a result, land prices will always be high and its value will continue to rise. This myth, which many believe in, has drawn a lot of people into real estate and has brainwashed others into believing that there would be a time when there would be no more land to be bought.
Much as there is some truth to this myth, technology has increased the ability to utilize small parcels of land by, for instance, the construction of story buildings. According to studies that have been conducted to disprove this myth, there is enough land in the world to accommodate up to four times the current population. Therefore, the myth that had been instilled in people’s minds to make land a precious and rare commodity isn’t true.
4. Land Prices Always Go up in Value
The myth that land prices will always rise is prevalent in developing countries that have witnessed the growth of the real estate industry in the last decade mostly due to urbanization and growing economies. Consequently, most people in these regions will not believe you if you disproved this myth as all they have witnessed is real estate in its blooming stage.
If you compare this scenario to the current situation in developed countries such as the United States and Japan, you will find examples of times when real estate prices crashed and dropped by up to 50 percent. In Japan, the prices have not increased in the last decade. Since land is a valuable resource, its value relies on other factors such as the economy, among others.
5. Real Estate Investments can be Flipped Easily
There was a time when real estate investors made headlines after they were said to have flipped properties several times. Flipping is a term that refers to buying and selling real estate properties several times in a short span. The stories of these self-made millionaires who tripled their fortunes from borrowed money inspired many people, and some began to think it is easy to buy and sell properties. What was left out of these mind-blowing inspirational stories was the transaction costs you will incur if you actually bought and sold property over and over. Furthermore, not all buyers are just a call away; you will have to invest considerable time to convince them. The rewards of this process don’t come easy and can be very draining.
6. Buying is Better than Renting
The rent versus buy debate has been on for a very long time. Most people believe it is better to buy than rent since ownership provides you with security and buying makes you “responsible.” Renting may be the wiser thing to do in some situations though. It all depends on your financial situation and each circumstance will be different. Hence you need to analyze your situation to make a wise decision. It is essential to know everything before investing.
Real estate investments involve large amounts of money and as such, most people will want to research exhaustively. It is, however, not possible to learn everything before getting into the business. Just like in any other field, you will learn as you progress. It is important to set your goal and create a plan on how to achieve it.
The real estate industry has been around for centuries, and that is why there is so much to be said about the business. The myths should neither deter nor blind you though. Filter fluff and invest wisely. If you need expert advice on investing in new property or management of your current property, the team at LCI Realty are the experts you need to work with. Contact them today for more information.
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