Most myths are tall tales of adventure passed down through centuries, but most people know these stories are just fictitious fun. But there are many myths surrounding other topics that aren’t so obviously fictional, and plenty of people are willing to believe the myths they hear if they don’t have any facts to guide them. There are a lot of real estate investment myths, but we’re going to list the ten we hear most frequently, and shed some light on the truth behind each myth.
Real Estate Investment Myth #1: You need tons of extra money.
While it is true that involvement in almost any real estate investment project will necessitate some of your own funds, it’s simply false to think you can’t be a real estate investor unless you have a couple thousand dollars extra in your checking account. Real estate investors buy properties and sell them to make a profit, and you may be able to find projects that allow you to do just that with as little as $30k! Furthermore, with the assistance of a great hard money lender, you could qualify for financing and get real estate investment funding specifically for you to turn your investing dream into a reality. So, next time you hear someone say that real estate investment takes tons of extra money, be sure to set the record straight.
Real Estate Investment Myth #2: Only wealthy people can be successful real estate investors.
Whoever first propagated this myth was probably confused, because the truth is that successful real estate investors usually become wealthy people, but if you had to be wealthy to be a successful investor, there would be a lot less real estate investors out there! Simply put, your savings account statement has zero correlation to your ability to be a successful real estate investor. One of the great things about the opportunities presented by real estate investing is that there’s always some level of it that’s accessible to people from all walks of life, especially when you factor in the availability of real estate investment financing; real estate investments come in every flavor.
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Real Estate Investment Myth #3: Being a real estate investor requires certifications and special licenses.
This is one of the most false myths on the list, because saying that real estate investors are required to be licensed and certified couldn’t be farther from the truth. The fact is, you don’t need any special qualifications to buy a property, period. Many real estate investors choose to work with some licensed and certified professionals, such as real estate agents, real estate attorneys, and hard money lenders, but none of these are legally required.
Real Estate Investment Myth #4: Experience with investment properties is required to get started as a real estate investor.
I don’t know of anybody who could walk before they could crawl, do you? I suppose some people might think this myth is valid because experience definitely improves your odds of being successful, but there’s a lot to be said for borrowing knowledge and taking advice from those who are experienced. But even if you choose not to learn from someone more experienced than you, consider this: the only way to get experience with real estate investing is to do it. Every other real estate investor in the world had zero experience at some point in their lives, so don’t let a lack of experience stop you.
Related FAQs: I don’t have any experience in real estate investing. Could I still qualify for a hard money loan? | I already have the funds for my real estate investment project, so why would I need a hard money lender?
Real Estate Investment Myth #5: Real estate investments require a lot of extra time.
It’s easy to see how this myth got started, because most real estate investors are busy people, and the most successful real estate investors do it full time. However, it’s still a myth because we know plenty of real estate investors who started with full-time jobs and families, yet still had time to manage their real estate investment projects through to completion. Besides, it’s true that some real estate investment deals are very time consuming, but many real estate investment deals require very little time at all.
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Real Estate Investment Myth #6: To buy a property in foreclosure, you must have the full purchase amount in cash.
This myth is untrue in two ways; when buying a bank-owned foreclosure property, you’ll typically have many of the same options for financing as you would have for any other property listing. However, in the event that the investment property you want to purchase is available only via foreclosure auction or the courts system and requires cash, you can still qualify for the necessary funding from a private hard money lender.
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Real Estate Investment Myth #7: Long-term investment properties are the most profitable real estate investments.
Any experienced real estate investor will tell you that there is definitely not any hard and fast rules about the profitability of long-term investments versus short-term investments. This myth simply isn’t feasible unless it’s assumed that all real estate values increase no matter what, and that the condition of a property has zero impact on its market value. It’s verifiable that real estate investors can profit from all kinds of lucrative real estate opportunities, regardless of how long they hold the property, and the fact is that short-term investments pay off quicker, while long-term investments tie up the amount of funds you have on hand and limit the capital you have to work with. Timing is everything, and it’s possible to turn a profit by holding a property for any length of time you choose.
Related FAQs: What are the differences in the terms of a private hard money loan versus the terms of an institutional loan?
Real Estate Investment Myth #8: Real estate investing requires good credit.
Naturally, good credit never hurts, and the same can be said for the financial background of real estate investors. However, one of the most unusual things about working with a private lender for investment funding instead of a traditional institutional lender is the leniency and flexibility when it comes to qualifying for a hard money loan. While they’ll certainly look at personal financial factors such as credit score and credit history, private lenders will be much more likely to make their lending decisions based on the property investment, your plans for it, and the potential returns.
Related FAQs: What qualities are hard money lenders looking for when qualifying a potential borrower? | What qualities are you looking for when qualifying a potential borrower? | Do you have a minimum acceptable credit score for borrowers? | What’s the difference between getting a hard money loan from a private lender versus an institutional lender?
Real Estate Investment Myth #9: Real estate investing is very risky.
If you have done the right research, performed the appropriate due diligence, and crunched all the numbers correctly, it’s likely that your real estate investment project will be far less risky than stocks, and far more profitable than most other forms of conventional investments. An added bonus that reduces the risk even further is the fact that you’ll have full control over your real estate investment portfolio, which is something that most traditional investors would love to have.
Real Estate Investment Myth #10: The real estate market is good/bad right now, so it’s a bad market for real estate investors.
It’s true to say that your awareness of, and familiarity with, your local real estate market is certainly crucial to the ability to make good property investment decisions, however things like a “good market” or a “bad market” are subjective, and savvy real estate investors can find lucrative opportunities in any type of market. As your experience with real estate investing grows, you will learn how to recognize market trends, and you’ll begin to understand how different trends should affect your purchasing decisions. By doing your research and staying in tune with your local market, you won’t have a problem investing in the right properties at the right times.