Real estate has proven to be one of the most lucrative investments around for the last several decades. Still, people whose investment portfolios would do very well with real estate holdings seem to avoid it. Perhaps it’s because they have bought into the lies and myths that have clouded real estate investment for years.
Below are five real estate investment myths far too many people believe. Along with each one is an explanation of how things really work. If you have ever thought that real estate investing wasn’t for you, perhaps what you are about to read will change your mind.
1. Myth #1: Real Estate Investing Is Only for the Wealthy
A lot of real estate investors are wealthy people. But they didn’t start out that way. They started out just like the average guy or gal on the street. They invested in one property, then another, and so on. This patient strategy is that which allowed them to build wealth over time.
You don’t have to be independently wealthy to get into real estate. You can finance investments the same way you would buy a house. If you were looking to buy commercial property in Utah, you might do business with a hard money firm like Actium Partners. If you were looking to purchase a single-family rental, you could probably get a mortgage from your bank.
2. Myth #2: You Have to Own Your Home
The second myth is that people wanting to get into residential rentals have to own their homes first. Nothing could be further from the truth. There is no such requirement in either traditional or private lending. You can rent an apartment and still purchase residential rentals. Where you live has nothing to do with it.
3. Myth #3: Flipping Is the Easiest Way to Make Money
House flipping was the hottest thing in real estate investing back in the late 1990s and early 2000s. So many people were doing that the rest of us assumed flipping was the easiest way to make money in real estate. If you believe that, guess again.
There is good money to be made in house flipping. But succeeding requires hard work, diligent research, access to a lot of resources, and nerves of steel. There are definitely easier ways to make money in real estate.
4. Myth #4: You Have to Be a Landlord
While it’s true that the most common form of real estate investment involves becoming a residential or commercial landlord, being a landlord is not required. House flippers are not landlords. Neither are investors in real estate funds. And getting back to Actium Partners, their firm is funded by investors who finance real estate transactions without being landlords themselves.
5. Myth #5: You Can Make Money Without Spending It
This final myth may be the most dangerous of all: you can make money without spending it. It is not true. If you have ever entertained this myth, purge it from your mind now. Do not believe it. It is simply impossible to make money on investments without putting money into them. No one else is going to fully fund your investments.
Financing property purchases is part of the game. But lenders don’t provide 100% of the money. Investors still need to bring down payments and closing costs to the table. In addition, flippers need to have the money to do renovations. So yes, you need to spend your own money.
If you can overcome all these myths, you might want to look into real estate investing. There is a lot of money to be made in commercial and residential real estate.