5 Myths About Real Estate Investing
The Truth About Real Estate House Flipping & Investing
After the housing market collapse in 2008, many realtors (not to mention real estate investment as a whole) were cast in a negative light. Because of the effects of unpredictable factors, many viewed real estate as an abused system; a con game out to trick people out of their hard-earned money. Realtors, appraisers and especially lenders weren’t trusted. Practically overnight, the image of the average neighborhood “Realtor Joe” went from this… to this.
Well, no longer! I’m here to debunk the five most common myths about real estate investors and investing specifically. It’s time to restore “Realtor Joe” to his glowing reputation. So, if you’re looking for the TRUTH behind real estate investing, and can handle the truth, read on!
MYTH #1: “It’s all about the BENJAMINS, baby!”
Many people believe all real estate investors and/or agents are looking down at us common folk from their ivory towers, laughing their haughty laughs. The TRUTH is that most agents and investors are not rich, neither are they mercenaries. Achieving large profits off of real estate investments often doesn’t happen overnight. In many cases, it can take years of hard work and commitment. Knowing this, investors and agents have another goal in mind other than making it rain dollar bills: the happiness and security of others by helping them find a place to call home. If you’re not quite convinced yet that real estate investors are hoarding millions in the back room, take your everyday rental property owner, “Landlord Larry.” He collects the rent checks and therefore sits in the lap of luxury, right? Wrong. After taxes, insurance, HOA dues, mortgage payments and other expenses, the monthly cash flow for Larry will usually only amount to a few hundred dollars – which is usually put aside for inevitable repairs and vacancy periods.
MYTH #2: “They’re climbin’ in your window, snatchin’ your people up.”
Another myth that has plagued the industry is that real estate investors/agents are unethical, unscrupulous, unsavory characters. Picture the man from the silent film dramas with the long mustache and black top hat. The TRUTH is a few bad apples snuck into the batch after the housing market collapse and spoiled the reputation of many honest, hard-working agents and investors. These villains conned lower-income consumers into buying “remodeled” homes without advising them to conduct inspections. As a result, many buyers got stuck with property lemons. Fortunately for us, these days the average “Realtor Joe” is reliable and trustworthy. Also, thanks to changes made in the appraisal system, appraisers and home inspectors are, by law, assigned to properties at random from a centralized appraisal service. This significantly decreases the likelihood of getting stuck with an unethical appraiser or home inspector in cahoots with a shady realtor to rob you blind.
There. Now that we’ve shined the glorious beacon of TRUTH on realtors and investors, let’s shed some light on common myths surrounding the art of real estate investment itself.
MYTH #3: “All it takes to make a lot of money…is A LOT of money.”
It’s become sadly commonplace for people to not even think about investing in real estate because they assume they need a great deal of money in order to invest. The TRUTH is…you don’t! If you’re looking to get into a house right away and you don’t have a down-payment, there are plenty of alternative options. First, you can use an FHA loan or other financial loan as a down-payment for your property. Also, after living in the home for a year or two, you have the option of renting out your residence and buying another property to live in, giving you an extra income to help with the mortgage payments. Or, if you’re interested in rehabbing and flipping a house for profit, you can always get a hard money loan which can lend you 65-70% of the ARV (after-repair value) of the home. As a matter of fact, I just so happen to know of an amazing company that does hard money loans…:) (https://www.dohardmoney.com)
MYTH #4: “You can’t invest…unless you know somebody.”
The TRUTH is that the wonderful invention of the internet has forever banished the days of “insider investing.” You don’t need to know someone in the Mortgage Mafia to find a really good deal. You can find them online! The best real estate deals can typically be found in bank foreclosures and short sales. Other popular places to find great real estate deals are auction websites. You can also find them through the MLS (multiple listing service). Homes found through the MLS tend to be more expensive, but generally need fewer repairs and have less competition than those found through auction websites.
MYTH #5: “Becoming a landlord = NO LIFE.”
Suppose you want to invest in rental property. Good for you! Over time, this type of investment can prove profitable as long as you use it wisely. It’s also smart to separate fact from fiction. FICTION: Landlords are at the beck and call of their tenants 24/7. They call for repairs, to complain, or to crash your party at all hours of the day and night. FALSE. The TRUTH is, landlords rarely get calls from tenants after 5 pm. And when it comes to renting property, you can set your own hours of availability with your tenants. Another way to be a wise landlord is to beat potential complaints to the punch: thoroughly examine rental property when you purchase it, or after a tenant moves out. Make sure all issues are taken care of and repairs completed before renting the property. This will make your tenants happy, and happy tenants are more likely to pay their rent on time and less likely to make your life miserable.
Now that we’ve finally cleared up these real estate myths, you can plunge into the market with more confidence, as a buyer or a seller.