BUSTING REAL ESTATE INVESTMENT MYTHS!!
Emotions while investing in real estate often sway people. This is the reason why investors tend to believe in myths to rationalize their emotional decisions during an investment. One needs to make sound decisions on such financial transactions, without getting emotionally vulnerable. Therefore, myths related to this sector need to be busted.
These myths scare off the would-be investors from getting involved and undermine their potential. While a few other myths lead the investors to make bad mistakes.
In this article, we will list down a few of these myths and try to debunk them.
- Myth1: Land Prices Never Fall
While this is true for developing nations where the land prices have increased ten folds within a decade or two, we have examples from countries like Japan; a developed country; where land prices have reduced to 40%-50% its original value. The prices have stayed low for a whole decade after that.
The price of the land is related to a lot of factors among which the economic health of a country also plays a major factor. Thus, it is a myth that land prices are always appreciated.
- Myth 2: You Need To Be Rich To Invest
This is one of the biggest myths in the industry, which wards off potential investors. There are many creative ways to raise funds to invest in real estate. You can start by buying an old distressed property, then renovating the same, and later selling or renting it. These homes are generally available at a ridiculously low price. This strategy will help you refinance the original loan that you have while having to invest more in this sector.
You can also use a partner to raise initial capital for investment and buy in greater quantities.
- Myth 3: The Only Time To Invest Is When The Market Is Down
Well, this might seem true, because this gives hope for a larger profit margin. However, you also need to take into consideration that buying a property when the market is down will also fetch you lower selling or renting prices.
The reality is that you can make a good amount of money irrespective of the real estate market. Here, the key is to invest in a high-yielding property, which can ensure a handsome amount of cash flow.
- Myth 4: Increased Rent, No Tenant
While this problem can be really scary, the point is to gradually increase the rent over time rather than increasing the rent all at once. This will make sure that you earn your desired profits while maintaining good relations with your tenant.
- Myth 5: Quick Money
Many investors rope into the real estate sector to seek quick returns. When they do not receive the desired profit, they scare away the potential investors saying that it's a very volatile and risky market. A sustainable business model is what is required before investing.
- Myth 6: Source Of Passive Income
Real estate investment is a full-time business and you should treat it that way. Even though you can be involved as much as you feel like, this will earn you lesser profits. A lot of energy and time needs to be invested when you make your first purchase. Finding the best property, signing the contract at the lowest possible price to being involved in the construction itself will be a mammoth of a task. This will be like taking a calculated risk, the more hard work you invest in, the more returns you will be promised.
- Myth 7: Not The Right Age
Often the youths are deterred from investing in the real estate sector as they are said to be inexperienced and lack the capital as well as knowledge. There is no age limit when taking a calculated risk while investing in this sector. The earlier you start with your investment, the more profit you will earn over time. Don’t let your age be an excuse to stick out of the real estate investment market.
In conclusion, do keep in mind that real estate, in the beginning, may seem scary, as it is one of the oldest and best ways to increase your finances. Profitability will depend upon how much do you stick to these myths.