6 Real Estate Investing Myths That Will Make You Go Broke

6 Real Estate Investing Myths That Will Make You Go Broke

One of the most important classes you can take when it comes to real estate investing is separating fact from fiction, myth from reality. Some experts claim that somewhere in the neighborhood of 95% of real estate investors fail. To put that number in perspective, most real estate investors would stand a far better chance getting a realtor’s license and selling homes for a year (ie., only 75% of realtors fail inside the first year of business).

Here’s 6 real estate investing myths you need to get educated on pronto, if you have any chance of succeeding in this industry:

1. Believing the “low risk” hype surrounding real estate investing.

After all, real estate, just like public storage, is something that people will always need, right? Whlie this might be true, they don’t need to rent or buy what you have to offer. Heck, there might have been a nasty murder there, and/or rumors about a haunting you never heard about before you pulled the trigger and signed. There are so many unforeseen reasons why you might not sell the property right away. The reality is that regardless what route you go, real estate is a high cost / high risk / high reward type of investment, and certainly not for the squeamish.

real estate investing tips
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2. Listening to gurus.

There are a mega-ton of gurus out there purporting to be an expert in the real estate investing game. Most have a rags-to-riches story to go along with how they gained their expertise. The truth is, you can’t trust any real estate guru’s word unless you work for them at the highly profitable firm they’ve built, or they give you unlimited access to their financials to see if their bank account really reflects the investment savvy they claim to have.

3. Linking flipping to real estate investing.

Grab some property for next to nothing, fix’er up and flip it for a fast and cool profit. Nothing could be easier, right? The flipping shows on TV make it look like really fast and easy profits, but the reality is that the deck is almost always stacked against a house flipper when they’re starting out. The stark reality is that most will give up, and/or go bankrupt before realizing any success. Read this: Flipping is nothing more than speculation at best. There’s a massive learning curve to gaining the insights, staff, outsourcers, and financial backing necessary to pull this risky endeavor off.

4. Underestimating the time and expense necessary to get the home on the market.

In other words, underestimating the renovation process entirely. You might think you have a good deal on a potential sale or rental property. That is, until your local building inspector comes to find a major crack in the foundation or potentially deadly mold residing inside the home. The reality that gets missed by so many new real estate moguls-to-be is the need to have the home inspected thoroughly before signing, then having a professional team of tradespeople who know what they’re doing to give you a reasonable cost and time to complete whatever work is needed.

Real Estate Investing Myths and Mistakes
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5. Relying on the buy, then immediately sell mentality.

This is a ridiculous belief that’ll have you sent packing, with your pride gone in no time. Most houses don’t traditionally sell quickly, even with the biggest, baddest realtors going full tilt on the marketing end. The reality is that the median time a ‘perfect’ home that’s ready to move into takes to sell is around 80 days including the closing process, with many taking up to a year to finally close a sale.

6. Letting emotions make your decisions.

This is another big problem that can come from listening to real estate investing gurus. Each has a truly remarkable tale or two about times when their ‘gut’ told them to buy a risky property that ended up putting them on the fast-track to wealth. What they never tell you is about the times when their gut made them fall flat on their face financially. Perhaps renting is the better option over losing tens of thousands by accepting a low-ball offer? Always use sound judgement and ask those who know better when you feel yourself slipping into a emotional trap and ready to make a rash decision.

Real Estate Investing Mistakes to Avoid
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As you can see, there are lots of myths surrounding the real estate investing game. Separating fact from fiction and keeping up with newly emerging trends across the industry is the best way to both stay informed and stay out of trouble.

You’ll only learn through experience, but it’s important to make sure you don’t lose your shirt before gaining that education!

Share your own real estate investing tips and experiences in the comments.

Main Image Credit: Tomas/Flickr

 

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