Everyone seems to have opinion on the best way to invest in real estate. There are many arm chair quarterbacks that have “the right play” to achieve the best returns. The “noise” around investing, the stock market, the economy, the housing market and cash flow vs/ appreciation is loud even for the seasoned investor. There are five myths that we seem to hear a lot that we would like to quiet down!
#1 I don’t know enough about real estate and construction to invest.
Real estate investing and the rewards that come from this are not just intended for the highly intelligent, ivy league, entrepreneur subset of society. Real estate investing and reaping the rewards is for anyone that is interested enough to learn about strategies to help them achieve streams of income, and anyone savvy enough to do some research on leveraging other folks knowledge. There is no need to reinvent the wheel if it is already rolling. There are companies that have done the heavy lifting, do the property management and allow you to sit back and reap the rewards of their hard labor.
#2 I am not an accredited investor and I’m not rich. .
It is true that a lot of real estate investing opportunities are only open to accredited investors. There are many, however that do not require accreditation. Crowd funding opportunities often allow for the everyday investor with some money in the bank to invest for a much smaller amount than it would ordinarily take to purchase a home to renovate or to flip. We often hear “I don’t own a home, don’t I need to do that first before investing in real estate?” It is not at all a prerequisite to have owned real estate prior to investing. Sometimes there is a better opportunity to invest when you aren’t encumbered by a high debt/income ratio.
#3 Passive means that I don’t have to do anything.
Wouldn’t it be nice to sit back and just look at your bank account grow without doing anything? Passive investing does not mean that you don’t have to do the work on the front end. Doing your Due Diligence, understanding the market, the risks, the operating nuances of the companies you want to work with are all part of what determines your satisfaction and success in passively investing. Also monitoring your investments, and keeping track of the market, the economy in general and the terms of your investment all require you to be focused and aware.
#4 Banks and financial institutions are the only way to invest in real estate.
Coming from the old school perspective of real estate investing getting a bank loan was the way you obtained real estate. Today there are companies, and individuals that have opened up the loan market to support more creative ways of financing. Although there are still requirements and restrictions there are more options than you might think.
#5 Owning real estate is all about Appreciation.
There are always investors that have benefited from the spike or nosedive of the housing market and are eager to tell you that it is all about appreciation. There is a ton of speculation when it comes to investing and no one really has a crystal ball to predict what the housing market will do or where there will be a boom. Another option to invest is to invest for cashflow with the hopeful bonus of appreciation. By investing for cashflow there is the ability to avoid the high price housing bubbles and focus on the rent ratios.
As you investigate your options in investing in real estate, ask lots of questions, align yourself with like-minded individuals and read the right forums. You will be able to hear some of the myths and discern with the knowledge that you have acquired. We wish you many happy returns!