There’s no shortage of “experts” online or on TV who will try to sell you get-rich-quick real estate investing schemes. Real estate investing is a business where hard work and creativity can pay off nicely. It takes time. Don’t waste time buying into these misconceptions about real estate investing.
Misconception 1: You Have to Have A Lot of Money to Start
Creative financing, crowdsourcing, partnerships, and purchasing properties as an owner-occupant are all ways to start in real estate investing without having to pay a lot of money upfront. Lenders will count the anticipated rental income from a unit in your owner-occupied building as income when you’re looking for financing.
There’s also the “BRRRR” strategy: you buy a property that needs repair and fix it up, rent it out, refinance the mortgage based on the new appraised value of the property, and repeat the process with another home. It’s a risky strategy that requires the rehabbed appraisal value to be more than the original loan for the refinance, but many new investors have used this strategy successfully to begin building a portfolio of rental homes.
Misconception 2: You Have to Own a Home Before You Can Invest in a Rental
Not so. Your first home purchase can be as an owner-occupant, where you buy a building that has a unit for you to live in and one (or up to three more) for a tenant to live in. The anticipated rent counts as income and the owner-occupant loan may require no down payment.
Misconception 3: You Have to Invest Locally
This another misconception about real estate investing propagated by people who have never heard of the Internet. It’s possible to get a very accurate picture of a potential investment property online thanks to virtual tours and remote gig-economy apps where you can hire someone to take photos and do repairs. Plus, with good research, you can determine property values, cashflow on local rentals, and rent rates in desirable neighborhoods in areas where you don’t reside. Experienced real estate investors say that they’ll live where they want to live, but invest where they can make money. For example, Atlanta, Georgia, has been a profitable real estate investing market for the past several years, and good deals are still available. Hiring an experienced, knowledgeable property management company in Georgia when you live out of state makes investing in, leasing, and maintaining profitable properties easier.
Misconception 4: Real Estate Investors Are Unscrupulous
Have you ever met anyone whose life ambition was to become a slumlord? Legitimate real estate investors care about their tenants and their properties and are passionate about making the areas where they own properties attractive, safe, and welcoming. The financial crisis of 2008 soured many people on the idea of investing in real estate, but it also drove a lot of the bad actors who roped inexperienced buyers into risky deals out of the business. There’s nothing sleazy about making money in real estate investing, as long as it’s done with integrity and respect.
Misconception 5: You Can Get Rich Quick in Real Estate
Real estate investing is a business, and like any business, it takes time to nurture and build. While some make money “flipping” houses, the greater number of investors make a good, steady income by slowly building and hanging on to a portfolio of profitable properties that attract loyal tenants. Property management companies such as Excalibur Homes partner with investors to ensure success in the rental real estate business.