So you want to become a real estate investor. But it takes so much money! What about all the risk? Does this mean we’ll be buying and flipping houses like those people on TV? From having a stereotypical image of the billionaire real estate tycoon to assuming that these sorts of investments require fast-paced flipping and high risk, let’s work to debunk some of the top misconceptions of investing in real estate.
The Top 5 Misconceptions of Investing in Real Estate
1. It takes huge amounts of money.
One of the most common misconceptions of investing in real estate is that you have to be a millionaire in order to do so. Real estate investments don’t have to be on the scale of purchasing a New York high rise or putting your name on a Vegas hotel. Most real estate investors find that by getting advice, doing research, and being strategic about where they buy rental investment properties like a small residential single-family home or a condo in a nice building can produce decent passive income.
2. Real estate is a risky investment.
Yes, the real estate market ebbs and flows. That doesn’t mean that real estate isn’t a wonderful investment opportunity. By researching and understanding the market in the area in which you’re planning to buy, you’re able to mitigate risk and potentially find excellent, undervalued investment opportunities. Turning your property into a rental means creating an income stream that will produce no matter what the real estate sales market is currently doing.
3. Have you seen HGTV lately? The best investors buy and flip!
While reality TV makes buying a property, transforming it, and flipping it to make money seem like an easy and glamorous way to make cash but what they don’t show you is the actual costs on both ends of each deal. To truly make the most of your investment, plan to hold on to it until its value really increases. To get cash flow out of it in the meantime, rent it. Don’t want the headache of being a landlord? Place it with a property management company.
4. There’s no skill involved with real estate investing.
Another of the rampant misconceptions of investing in real estate is that you can simply buy a property anywhere and rent it out or wait for it to increase in value in order to make money. This is where having an insider’s view of the market is important, especially if you plan to purchase investment property in an area with which you’re unfamiliar. Knowing what areas are currently hot markets and which ones are up-and-coming can help you get in on good deals, as well as avoid buying on the high end of a market that’s hit its peak.
Working with a real estate investment company is invaluable for getting advice on where and what to buy, as well as how much money to put into remodeling a property before you plan to sell it or rent it out. If you don't want the headache of possibly having to renovate your potential real estate investment, some investment companies specialize in completely turnkey investments, meaning the property is already renovated, tenanted, and producing cash flow before you even purchase it.
5. Owning rental properties is like have a second full-time job.
People purchase rental properties because they want to put their money to work for them - not because they're looking for another full-time job. Being a landlord can become just that, with finding and screening potential tenants, setting up and accepting rent payments, as well as managing maintenance and repairs that may pop up at all hours of the day and night.
Thankfully, that’s why property management companies exist. They’re skilled at handling the rental process one hundred percent. All you have to do is find an experienced company that can secure responsible long-term clients who will take good care of your property while keeping a constant source of income rolling in.
Smartland is Northeast Ohio's largest real estate investment firm. Our team combines financial savvy with expertise in property management to help clients identify and invest in alternative investment vehicles that have strong growth potential.