Don’t Let These 8 Myths About Investment Properties Scare You Away
Renters Warehouse Blog
Don’t Let These 8 Myths About Investment Properties Scare You Away
When it comes to real estate investing, sometimes it can be hard to separate fact from fiction.
Everyone seems to have a story about that time they tried to invest in property and ended up knee-deep in disaster! Then there are the stories about toilets overflowing at 2:00 a.m. or someone who made a poor investment and ended up losing money with it.
But for every story out there about a real estate investment that didn’t work out, there are hundreds more about successful investors who are using real estate to grow their wealth. These stories are not uncommon, but you don’t hear about them as often. After all, there’s nothing attention-grabbing about a rental property that’s performing as expected, generating cash flow, and providing an income. You only hear the big stories, the ones that stand out and make the news, or discussions around the watercooler.
If you’re thinking of investing in real estate, it’s important to have the facts in –before you start. In this article, we’ll attempt to set the record straight and do some myth-busting of commonly held rumors.
Read on as we separate fact from fiction and shine some light on what really happens when you invest in income property.
#1: You’ll Have to Do Maintenance All the Time
Sure, it’s handy if you know your way around a toolbox, at least in the beginning. But the truth is that you don’t have to be a handyman –or woman, to invest in real estate! There are plenty of investors out there who’ve never picked up a crescent wrench in their life.
Many investors start out doing maintenance and repairs themselves with their first property, but once they start scaling their real estate portfolio, they soon find that they have less and less time to spend on maintenance anyway. Whether or not you’re skilled at DIY, it’s a good idea to find yourself some reputable professionals that you can call when you need work done at the rental. A good general contractor, plumber, and electrician will all prove to be an invaluable part of your team.
#2: You Don’t Want to Be a Long-Distance Landlord
Most of us have heard stories about long-distance rental properties going awry. But this doesn’t mean that you need to limit your investments to your own hometown. These days, it’s easier than ever to be a long-distance landlord, and many investors are buying properties that are outside of their state. This allows them to expand their search net, and find properties that are better deals, or in more up-and-coming areas. When it comes to investing in real estate, the world is your oyster. You’re free to invest wherever you choose! Hiring a good property management company can help you to ensure that your property is well-managed, no matter where in the world you’re located.
See: From Self-Managing Properties to Living in the Florida Keys: The JD and Michelle Dickerson Story.
#3: Real Estate Is Far Too Risky
All investments carry a certain level of risk, and real estate is no different. However, with long-term investments like income property –the risks are considerably lower than fix and flips –where profit is entirely contingent on perfectly timing the market.
Additionally, real estate can also be a great alternative investment; serving as a way to diversify. For most people, their 401(k) or retirement savings is heavily invested in the stock market. By adding real estate to your retirement, you can diversify your assets, spreading the risk.
Rental property is also a tangible asset, and it’s fairly easy to assess its value. This transparency means that there’s also a lot that you can do to help mitigate any risks before investing. Doing your research on the area, and considering factors like income and projected expenses, can all help you to assess a property to see if it’s worth investing in in the first place.
#4: Now Is a Bad Time to Invest
Everyone wants to know: when’s the best time to invest? Is the housing market starting to enter bubble territory? Will we be seeing 30% drops in housing values soon?
While it’s impossible to predict the future, it’s important to realize that the best time to invest in rental property –is now! (The second-best time, of course, is always 20 years ago!) The sooner you make your purchase, the sooner you’ll be able to start generating cash flow and experiencing long-term appreciation.
Additionally, because income properties are a long-term investment, they’re less contingent on the market than say, a fix and flip property would be. Because of this, they offer a level of protection against any short-term fluctuations in the market.
When assessing a property’s viability as a rental, you’ll want to consider local market trends and conditions, rather than just looking at national housing conditions. Consider things like job growth, local housing prices, and population growth can help you to assess a potential location. See the Renters Warehouse Research Center to find up-to-date housing market data on markets across the country.
#5: Real Estate Investing is a Fast and Easy Way to Get Rich
While HGTV makes it seem like real estate investing is a fast and easy way to get rich overnight, it’s not something that can make you wealthy immediately.
However, real estate can be a great way to grow your wealth in the long run. In fact, there are many aspects of real estate that make it an ideal long-term investment. For one thing, real estate generally experiences appreciation. Nationally, annual appreciation since 1996 has averaged at 3.63%. With income property, you’ll also be able to generate cash flow, not to mention you’ll be eligible for some pretty decent tax breaks as well.
#6: It’s Too Late to Invest
Is it too late to invest? While there’s a common misconception that you need to start investing when you’re young, that’s not the case. Sure, when it comes to any investment, the earlier you start, the higher the returns, but with real estate investing, it’s never too late to invest. Once you have a plan, and some capital that you can use for a down payment, you can start investing –and generating returns from that investment. In fact, if you’re approaching retirement, don’t feel discouraged or that you’ve somehow missed the boat –there are a number of advantages to investing when you’re older.
#7: Rent Increases Drive Tenants Away
One of the great things about rental property is that you can expect the amount that you collect in rental income to increase over time. Rents increases tend to hover around 3% annually.
While it’s true that doubling the rent overnight will most likely result in a vacancy, you can indeed raise the rent without having to worry about tenants leaving in droves. Rent increases are normal, and expected. Most tenants won’t mind as long as they’re not too drastic and are in keeping with the market rates.
#8: You Don’t Know Enough to Invest
Finally, while it’s important to brush up on your knowledge of investing before you dive in, it’s also crucial to avoid the myth that you need to know absolutely everything before you dive in. There are plenty of people out there who know a lot about investing, but are missing out on the benefits of investing because they’re afraid to take that first step. The truth though, is that at some point, you’ll need to take that first step toward action. Don’t let a fear of making mistakes hold you back. A few bumps in the road are far better than inaction due to fear.
Also see: Learning from the mistakes of others. See mistakes that you’ll want to avoid when you start investing in rental property.
When it comes to rental property investing, misconceptions abound. But don’t let these myths keep you from investing. The beauty of real estate is that you have the potential to create your own success.
So instead of dwelling on the myths and rumors, try to learn about the tried and true methods of what works. Brush up on your knowledge of investing, frequent helpful blogs and websites, and focus on what you know to be true. With the right strategy, and careful planning you’ll be able to get yourself off to the best start possible –and will be ready to take that first step toward building your own success story.
Find out how everyday investors get started with real estate investing. See: From Construction to Owning Rental Properties, the Matt and Michelle McKinney story.