Many of you have similar worries about jumping into the market. Many of you know that real estate has historically been one of the great ways to build wealth, but hold back. I know this feeling well; I remember what it was like to build up to my first deals, and the excitement (and goosebumps) of actually taking the plunge.
Recently I’ve noticed FOUR MYTHS about real estate investing that seem to hold people hostage on the sidelines:
1. It’s too risky and the market’s too unpredictable so I will wait.
True, many markets are quite frothy at the moment.
However, smart investors do not do markets: they do deals that make them money.
THERE ARE STILL MANY DEALS that are well below market and will cashflow like crazy, and many opportunities for investing according to the criteria of my System. Inflation and interest rates are still historically low. This probably will not last.
2. I need a lot of money and great credit to get started in real estate investing.
True–if you are only looking at conventional bank financing. Banks have tightened their standards to loan to investors. You will probably need a great credit score and 25-40% down payment to obtain regular bank financing.
But many investors do dozens of deals a year using alternative financing techniques such as owner’s terms, lease optioning, money partners and hard money lenders. They don’t need the bank, and they don’t use their own cash or credit. IF THEY CAN, SO CAN YOU.
3. Owning rental property is a nightmare.
It certainly can be. That is, if the property was not purchased properly. Many landlords and landladies pay too much, borrow too much, and cannot afford the vacancy and repair expenses over time. They try to manage the property themselves without proper training or temperament.
However, in today’s market many properties will cashflow because they can be bought inexpensively enough. This may not be true in Midtown Manhattan or San Francisco. Many investors are buying property 50 cents on the dollar in secondary markets such as Alabama, Texas, Tennessee, Michigan etc., which do cashflow.
Also, there is a BIG DIFFERENCE between owning property and managing it.
Buy the property right, get a great professional manager, manage the manager and now on the weekends you can swim and go fishing instead of looking at Billy Bob’s broken commode.
4. Real estate is too hard and overwhelming, so I’ll just wait to get started.
True. There are a lot of moving parts to become a successful real estate investor.
Most beginners become overwhelmed or do not ever get started is that they try to do everything themselves.
Real estate investing is a business and YOU MUST BUILD A TEAM. Don’t spend a year attempting to figure out what contract to use, get a good title or escrow company that will do all the paperwork for your closings. Find a good contractor who will help you with repairs and repair cost estimation. Put in place systems and checklists.
I have built a great team so my job description is to talk on the phone and eat lunch while my team helps me do the deals and we all share in the revenue.
While I was at it, I thought of another myth that I really hope I can bust for you:
Bonus: 5. Real estate is too speculative.
True! But…I am not a speculator. I am an investor. There’s a big difference. And this is what all of my students learn. I don’t bet on markets changing based on some theory. My system teaches a methodology that focuses on finding and closing on deals that are on average approximately 30% below market (after rehab). Knowing how to do this REMOVES speculation from the business.
Please don’t let these myths hold you back.