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These are the biggest myths and lies when it comes to real estate investing, and my unbiased perspectives when it comes investing in real estate - enjoy! Add me on Instagram: GPStephan
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The first myth I hear is that “Renting a house is a bad idea - it’s always better to own your home.” Well, the thing is, when it comes to this, there’s absolutely not a one-size-fits-all approach. And these are the situations where I’d say people are better off RENTING instead of BUYING:
The first is that if they’re new to an area and don’t know if they’re going to like living there. In this case, you’re better off renting until you get to understand the area and figure out where you really want to be. This one is pretty self explanatory.
The second is if they don’t intend to keep the home for more than about 4-5 years. Here’s the reality. Holding real estate for 1-5 years is not a long enough time to guarantee you’ll have a positive return. We’ve been lucky to see a huge surge of appreciation over the last 7 years, but this is not normal and we’ve just come out of the worst recession we’ve seen in a long time. Realistically, your house is not going to be going up in value 10% per year…So this is why I recommend that people buy a home, who plan to hold on to it FOR AT LEAST 5-7 YEARS…this gives you the highest chance to rebound from any fluctuations in price. Anything under that, and you’re likely better off just renting.
The third reason you’d be better off renting is if you have a better use for your capital than tying it up in real estate. Real estate is great for solid, long term wealth preservation and growth…but it doesn’t compare to investing that money in your own business in terms of ROI. So for most people who run their own cash flowing business, they prefer to LEASE and have as much free cashflow left over as possible to re-invest.
The next myth that is SUPER COMMOM is that YOU CAN’T FIND A GOOD DEAL BUYING A HOUSE ON THE MLS. The truth is that the source of the deal does NOT matter, at all. I’ve seen INCREDIBLE deals come up on the MLS, and because they were improperly advertised, they were overlooked and an investor was able to scoop in with a great deal. It’s more important to actually find a good deal, than to focus on the SOURCE of that deal.
The next real estate investing “myth” out there is that having more units equals more profit….again, this is something I hear A LOT and it’s a misconception that I’d absolutely like to clear up. Lets make it very clear: Having more units does NOT mean you will make more money. Just because you have 10 units doesn’t mean that is a better investment than something with 2 units. When it comes to identifying a good investment, ALL that matter is how much money it makes after expenses, and how much you buy it for….that’s IT. I’ve seen HOUSES that are better investments than 10 unit buildings…and I’ve seen some 10 unit buildings as better investments as houses. It all comes down to the price you buy them for, that’s it.
The next misconception when it comes to real estate is that you can TIME THE MARKET. Yes, if you can time the market, you’re going to do REALLY well. But that’s not what real estate is about: you buy on how much cashflow you make every month, and how much equity you can get on the deal based on the facts of TODAY. It’s more important that you find the right deal TODAY, than hope the market crashes AND you buy in at the perfect time.
And finally, the last real estate myth we’re told is that it’s a full time job investing in real estate. And this one is a little yes, and a little no. When it comes to real estate investing, it can really be as hands on or hands off as you’d like…you can work as hard as you want, or outsource as much as you want as long as your rental numbers are strong enough.
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