The 5 Biggest Myths of Real Estate Investing: Debunked
As with any industry, there are misconceptions and myths that surround real estate investing that ultimately hurt those trying to get into the industry or those who are already involved. These falsities can either stunt someone’s potential to be successful in this industry or might lead someone already invested to make some big mistakes. We at CPL recognize the potential within real estate investing and want to do our part to make it accessible to anyone with a good work ethic and perseverance to get through the challenges that will likely come up along the way.
For that reason, we’ve done our research and identified the top 5 myths that might be holding someone back when it comes to investing in real estate. Let’s take a look at these myths and debunk them one by one, shall we?
1) You Need Lots of $$$$
Myth number 1 is that in order to be successful within the real estate investment industry, you need to have a lot of cash on hand. This came up over and over again in our research, suggesting that it is a prominent assumption out there. However, this is not always the case. Depending on the type of investment, there are many ways to get creative and find opportunities that fit within your financial realities.
For example, finding a partner that you trust to invest with allows you to share resources and also gives you some piece of mind when challenges arise: 2 heads are better than one, right? There are also options around wholesaling: contracting a home and then shopping the home around until an interested party is found to assign the contract to, before the contract with the original seller closes. Wholesaling allows you to avoid investing any resources into fixing the home up; rather you make a profit by increasing the price of the house to whomever you contract the home to. Additionally, finding houses in rough shape cosmetically but that are structurally sound could be a good fix n’ flip option, especially if you are able to buy the house in an auction or as a foreclosure making it less expensive.
If you get creative, there are many opportunities to get into real estate investing without the big bucks. And working with a hard money lender that is flexible, non-predatory, and meets you where you are at, also makes all the difference.
2) It’s all Passive Income
Myth number 2 is also pervasive. Folks think that once they buy a property, it’s all collecting rent from there, but this is simply not true. Just with any venture, real estate investing takes time and work; think of it like a business. The more you put in, the more you’ll get out. You need to be on top of repairs, management of the property, finding tenants, dealing with any issues that come up, etc. Now, depending on how much you are willing to invest, there are separate entities that do fulfill many of these roles, for an additional cost. So if you are concerned about maximizing your profit and don’t want to contract any of these roles out, you’ll need to be prepared to roll up your sleeves and put a lot of time and energy in!
3) It’s Quick and Easy
Myth number 3 speaks to the trend of creating entertainment content out of real estate investing. Have you ever watched HGTV and thought, that doesn’t look so hard, I could do that? Well, then this debunk is for you. The reality TV shows that revolve around fixing and flipping often do not capture the full life cycle of an investment property. They show the big before and after transformation, but do not go into the details of the deal like: determining the ARV (after repair value) of a home and making a bid accordingly, finding and managing folks like contractors, brokers, lenders, and property managers, dealing with taxes, insurance, and other accounting. These are some examples of the many ‘not so fun’ aspects of real estate investing; and to be honest, these are the things that really measure someone’s success. All that to say, be weary of what you see on TV and know that there is a lot more work and effort that goes into this than what is shown on TV for our entertainment. Again, the more you put in, the more you will get out of these types of ventures.
4) It’s all About the Market
Myth number 4 is all about the market. While being aware of the real estate market is important, and we cover that thoroughly in a previous blog post about Indy’s Housing Market in 2021, it’s just as important to understand that the market fluctuates. Oftentimes, folks will think that buying in bulk during a low market and selling off when the market is stronger is a foolproof way to make money. However, this is simply not true. There are so many factors that go into the real estate market. There are folks who are able to make huge profits in a downward market, by knowing the right people and managing to secure the right properties. On the other hand, there are folks who do ‘everything right’ when it comes to the market and still end up losing money. What’s important to know here is that oftentimes, the market is cyclical, but being patient can make all the difference.
5) You have to be a Certain Type of Person to Succeed at Real Estate Investing
Myth number 5 holds many, many assumptions and we want to try to break some of those down. Throughout our years working in this field, we’ve heard many people talk about perceived limitations of entering the field like age as a deterrent (too old or too young), the fact that they don’t own their own residential home, that they have little to no experience in DIY, etc. And in the end, many of these people, even with their fears and doubts, end up being very successful in the long run with real estate investing. The bottom line here is that there is no one type of person that is going to succeed in this field. If you have the work ethic and the persistence to stick with it when things get tough, you will find value in doing this work. Many folks allow this fear of not being the ‘right type’ of person to succeed at real estate investing to get in the way of their goals and dreams. So if you are reading this, know that YOU, yes you, can succeed in this field if you have the right team around you and you put in the hard work.
Overall, the team at CPL Investments is committed to debunking these myths so that we can make real estate investing more accessible to the everyday members of our communities! Historically, real estate has been a playground for the wealthy and elite, but increasingly, the knowledge to succeed in this field is available to anyone who has a good work ethic and is looking for a challenge!
Working with a hard money lending team like the one at CPL, has so much added value. Specifically for folks worried about any of these misconceptions, our specialized one-on-one coaching services that support clients every step of the way through the deal process could be a game changer. It is normal to feel apprehensive when starting something new. Moreover, it is normal to feel stuck, if you’ve been in this field for a while and seem to be stagnant in your portfolio. Let us support you in breaking down these myths as well as any other misconceptions or obstacles that might be limiting your potential to succeed in real estate investing.
Contact us today and see how working with CPL investments can make all the difference in your real estate investment success!