Investing in real estate is one of the smartest financial decisions you can make. In your search for prime real estate insight, you may find investing myths which cloud potential and can negatively impact you and your real estate investing business. This article will uncover some of the top real estate investing myths to help you stay ready for your next quality investment strategy.
Myth #1 – Investing in real estate requires a lot of time.
While this may be the case for building a knowledge base of real estate and your target market, investing in real estate does not take much time at all. What does take time is building the right investment team to reduce the amount of time and effort in building a profitable portfolio.
Myth #2 – Buying new real estate means prices will go up and you can sell later.
If you want your investment in real estate to pay off, you should plan on holding an asset for a long period of time. Nobody knows what the market is going to do, but good things tend to happen when real estate is owned longer – rents tend to increase, loans are paid down, and the valuation potentially goes up. Ensuring a positive cash flow with your earnings can give you flexibility on future investment opportunities.
Myth #3 – There are more opportunities to buy in a down market.
You can find opportunity in any market. Building a highly profitable rental portfolio that originates from deals in down markets can provide a great return. Although properties may cost less in a down market, rents decrease as a result of the economic status of the market. The key is exploring investment opportunities where you can expect consistent appreciation over time and achieve a high cash flow.
Myth #3 – Own a house before buying a rental property.
You can actually finance a property that can pay for itself by investing in real estate. For example, say you invest in a single family home and rent out space for $4,000 a month. Meanwhile, you live in a property with $1,500 rent and pay $1,000 for the mortgage. By living in a rental, the property you invest in pays its own mortgage and your costs. If you invest in a multi-family property like a duplex as your first property instead, the rental income you receive can make it easier to qualify for your next property.
Myth #5 – Properties closer to you are better.
Although this is sometimes true, depending on the property and investment strategy, you’ll want to focus your energy on only buying properties that help you achieve your goals. A big plus for living close to your investment properties means you can monitor it constantly. But you may find more opportunity in somewhere farther than your normal scope. Some criteria to help you invest in a certain area include – population increases, prevalence of crime, price appreciation, and price to rent ratios. These key factors are a good indicator of the overall quality of the market in the area you may be interested in.
Myth #5 – Choose only tenants with a high credit score
A credit score is calculated based on the following elements: payment history, amount owed in relation to credit limit, length of time, inquiries, and type of credit/number of tradelines. Low credit scores may significantly affect people with very few credit accounts and a short track record, but may have nothing to do with their ability to make payments. Tenants with the better credit scores are more likely to stay for a shorter period of time at a residential property than those with lower credit scores, eyeing mainly at owning a home themselves. In short, judging a prospective tenant on credit score alone is not enough.
Investors can still find opportunity in plenty of areas, but must diligently check risks at every turn. Choosing a perfect site based on these tried-and-true investing beliefs is still not an easy feat. It requires top insight and patience to purchase a quality property and increase your returns. Investments partners Primior can guide you through every step by keeping you informed of all relevant tax, market, and financial information. Primior can aid in your navigation through the complex market to diversify your portfolio and deliver real value that appreciates over time.