In the process of deciding whether you should invest in real estate, seeking the opinions of others is common. After all, it is an investment endeavour. Real estate investment can be very exciting. According to a Statista report, the real estate sector in Europe was estimated at 9 trillion U.S. dollars. It can be confusing too. When consulting other people (both experienced and inexperienced in real estate investment), you’ll hear lots of opinions. Therefore, you will inevitably come across statements made that may be myths. It is important to verify the accuracy of the opinions you hear regarding real estate investment. To learn about the myths associated with real estate investment, read on.
The most common real estate investing myths have been stated and debunked as follows:
Myth 1: Investing in a real estate close to your home is ideal
Some people believe that investing in property close to home is ideal for success. Being able to physically access your property is an advantage. However, it shouldn’t be the deciding factor. It isn’t mandatory to invest in real estate property close to home. It isn’t always advantageous too. Especially if your goal is to expand your real estate portfolio. Casting a wider net (in terms of geographical location) is necessary to find good investment opportunities. If your goal is to fix-and-flip the property, then you can outsource the work to a property management company.
Myth 2: One has to be extremely wealthy to invest in real estate
Some people are of the notion that investing in real estate warrants access to unlimited funds. Why? It’s because people think that investing is expensive and investing with debt is unimaginable. However, the fact is that unlimited funds aren’t a requirement for investing in real estate. Although it’s beneficial to have access to unlimited funds, there are other alternatives. For instance, if you’re a first-time buyer, FHA loans are helpful. FHA loans enable individuals to make low down payments (3.5%). With FHA loans, the requirement is that the investor must reside in the purchased property. However, if that property is a duplex, the buyer can rent one side of the property. It’s imperative to thoroughly research one’s options (like FHA loans) before delving into real estate investing.
Myth 3: Real estate investments are extremely volatile and risky
People believe that investing in real estate may be highly risky because of the unpredictable nature of the market. There is also the fear of not getting tenants at all times. However, the truth is that all investments come with some degree of risk. With real estate investments, a significant advantage is that it is tangible investment. An investor will have a residence. Stable monthly income is another advantage that is unique to real estate investment. During economic downturn times, stock-based investments do not yield dividends. However, real estate investments can generate stable returns.
Myth 4: Investments should only be made in properties located in cities
A lot of individuals perceive cities to be ideal for property investments. This is because of developed communities and well-established neighbourhoods. Although properties located in cities are worthwhile investment opportunities, you have other profitable options too. It is key to remember the profitability of investing in emerging markets. Investing in property in locations that have been projected to see growth can yield highly profitable returns.
Myth 5: Fix-and-flip properties is an easy and quick way to yield profitable returns
Although it is possible to yield high returns from fix-and-flip properties, this isn’t necessarily an easy or fast approach. One’s real estate investment strategy should be backed by adequate research, calculations, and analyses. Running the numbers is of utmost importance in the case of fix-and-flip properties. One should ensure that they do not pay more than approximately 70% of the worth of the property after renovation. It is also imperative to remember that real estate investments are ideal for generating long-term stable returns. A study showed that most European countries have substantial gross rental yields like Moldova (10%), Ukraine (9.09%), Montenegro (7.53%), and so on.
Information is key. Thoroughly researching before investing in real estate property is necessary to not fall for any of the aforementioned myths of real estate investing.