People who aren’t real estate investors often think of this industry as being almost mythical. Here are some of the most common misconceptions surrounding real estate investing, and the most common ways to get into it safely.
“It’s A Seller’s Market”
The truth is that there are always good real estate deals out there, even in sellers’ markets. Different investment strategies work better in different areas of the country. So, if you can’t find a good property to invest in where you live, try buying outside of your state. Or, try buying outside of the country.
Sometimes, and in some places, there are deals that are better than in other places. That’s fine. What you’re looking for is a profitable deal. If you can purchase a piece of real estate and make more money with it than it costs you, then you’re good to go.
You also need to stay up on the market trends and the changes in various markets. And, this is where it pays to hire a good real estate professional to help you navigate waters outside of your home area.
“I Don’t Have Time To Invest”
This is why property management companies exist. If you don’t have time to grow your real estate empire right now, that’s OK. Companies exist that will manage the property for you. These companies will do everything from mowing the lawn to changing a light bulb to collecting rents, interviewing prospective renters, evicting renters for non-payment, and placing ads and showing your properties.
About the only thing you have to do is show up to the deal with the initial funds to purchase a property and then collect a check each month.
“There Aren’t Many Good Investment Opportunities Left”
Sometimes, the answer isn’t to invest in real estate directly. Fortunately, there are many ways to take advantage of the real estate market. You can invest in REITs, tax liens and deeds (provided you get good tax lien investor advice, mutual funds that invest in real estate, and a host of other options that provide indirect access to the real estate market.
REITs are real estate investment trusts. These investment trusts are set up with the sole purpose of investing in real estate. REITs usually make money by purchasing properties and collecting rents on those properties.
To be classified as a REIT, the trust must return at least 90 percent of its taxable profits to its shareholders as dividends.
That means that the REIT is incentivized to make you money.
Originally, these investments were created in 1960 to make investments in large-scale commercial real estate accessible to the average person. Today, they’re a popular alternative investment for real estate enthusiasts.
Tax liens are another alternative investment. In a tax lien investment, the investor purchased rights to a lien – a legal claim against property. The tax lien is a claim against a property holder for the non-payment of a tax debt.
The investor is, in effect, paying off the lien (tax debt) and assuming the responsibility for the collection of the tax debt himself.
The property owner now owes the investor the money instead of the municipality. Typically, these lien debts are amortized over a period of 6 months to 3 years. If the property owner doesn’t repay within the specified time period, the investor takes control of the property and may rent it out, live in it, or sell it.
“I Don’t Have Any Money To Invest”
This is a tough one. But, there’s almost always a way to find the money you need. Don’t think that, because you’ve little or no money in your savings account, that you can’t invest in real estate. There are plenty of ways to raise funds: Friends, family, banks, and even credit card companies (if you have a high credit limit).
“Real Estate Is Too Risky”
Real estate can be risky, but most real estate investments are actually low-risk propositions. There is no such thing as a risk-free investment, but real estate is one of the lowest risk investments you can make.
With that said, there are plenty of investors who have been burned on deals. You just have to do your due diligence and research a property before you buy in. If you don’t understand what you’re buying, don’t buy it.
“I’m Waiting For The Market To Turn Around”
There’s never a perfect time to buy into the real estate market. If you wait until the market turns around, something else will happen. Maybe interest rates will spike, making investment too costly. Maybe there will be increased demand for homes, causing the prices to skyrocket.
Don’t wait because you think the economy is bad. Talk with a real estate agent. Find the best properties on the market right now. Determine whether you can make a profit. Then, invest in them.
Ted Thomas is a Florida based educator, publisher and author of more than 30 books. He is now an in demand international speaker having speaking with Tony Robbins in engagements on investing throughout the world in Singapore, England, Australia and more.