5 Real Estate Investment Myths

Real estate investing is plagued with myths. These myths can be both a blessing and a curse. A blessing, because as long as you know how to avoid them, they’ll help reduce your competition. A curse, because if you believe them, your success will be diminished.

Here are five of the most common myths in real estate investing. Whatever you do, don’t let these get in your way to success.

Myth #1: You Need Good Credit to Invest

Having good credit helps, certainly. It lets you take the most straightforward path, the path of traditional bank financing. Yet even without access to perfect credit, you can invest. There are a lot of other financing options available to the savvy investor.

You can use lease to own options to secure investments, then flip them or find financing later. You can use owner financing. You can use a partner’s capital. You can also incorporate and do your investments through a corporation. At first, you and/or your partners may need to cosign the loans, but after a deal or two you’ll be able to lend money in the corporation’s name alone. Your own credit becomes a complete non-issue.

Myth #2: This Economy is Bad for Investing

Another common myth is that it’s difficult to make money in real estate right now, because of the poor economy. The truth is, there’s money to be made in any economy. In fact, in many ways there’s actually more money to be made in down markets than up markets.

In down markets, you’ll often be able to pick up undervalued properties. Few people are buying and a lot of people are selling. You may be able to pick up foreclosures or bank owned properties for pennies on the dollar. And, once the market hits bottom, the only way it can go is up. Real estate fortunes are made by buying undervalued properties, far more so than making improvements on mediocre investments.

Myth #3: You Need a Lot of Money to Get Started

This is also not true. In fact, in your area there are tens of millions of dollars just waiting to be tapped. Investors and high net worth individuals often have difficulty finding good investment opportunities. Sure, they can put their money in the stock market and earn a few percentage points a year. But most investors would jump at the opportunity to get in on a high return deal where they don’t have to do a lot of work.

Be creative. Network. Meet investors who have money and want to invest. Eliminate the risk for them and make investing simple. Do this right, and you’ll have more capital available than deals you can find.

Myth #4: Real Estate Agents Won’t Work With You

It’s true that most real estate agents are unfamiliar with property investing. Most real estate agents learned their craft by taking classes, then passing an exam. The vast majority of the questions on the exam are about residential properties. Investing is a whole different ballgame. Most real estate agents avoid investors simply because they don’t understand how the process works.

Yet, to a real estate agent, a committed investor can be a godsend. Most agents have to spend enormous amounts of time and money prospecting. They have to regularly make new contacts, follow up, ask for referrals and try to close sales. Every sale they make is a one-time sale, as most people only buy one property.

An investor on the other hand is a repeat customer. They might buy several properties a year, year after year. They refer other high quality clients. A good investor can be worth far more to an agent than the average customer.

The trick, then, to working with real estate agents is to be very specific about what you want. What kind of deals should they bring you? What kind of price range? What kind of information should they send you when they bring you a deal? So on and so forth. Once you can find and teach a real estate agent to work with you with your process, you can make a powerful team.

Myth #5: You Can Be an Overnight Success

TV infomercials often make big promises of quick successes through real estate. Yet, the truth is, real estate can be tough. You’ll hit many false leads, and have to work through many unexpected problems. Projects will take longer than you expect. You’ll have to learn a lot along the way. It isn’t easy, otherwise everyone would be doing it.

That said, the rewards are well worth it. Real estate investing can provide not just profits today, but ongoing streams of revenues that can support you and your family for years to come. It may take time upfront to learn the ropes, but in the long run it more than pays off.

Author Bio: This guest post is written by James Andrews from NAI Maestas Real Estate in Albuquerque.

Comments are closed.