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Tylynn Guidry4 min read

Misconceptions of Real Estate Investing

Real estate is an investment that requires patience, preparation, and planning.

Some common misconceptions of real estate include it being extremely complicated, too risky, and that you need to be an expert or wealthy in order to invest. Investing in real estate is one of the best ways to acquire wealth; however, many people are either too afraid to try or they feel they do not know enough to actually succeed. Some studies even say that 90% of millionaires have made their wealth from investing in real estate.

The most important concept that potential investors must realize is that investing in real estate is only as complicated as you make it. One of the biggest reasons people believe that real estate is complicated is because of the amount of time that is spent on the investment. Real estate requires a lot of time depending on the property you choose. While buying a property can be complicated, the basics of real estate are quite simple.

The basics of real estate

First, you purchase the property, then you have to manage the upkeep of the property (or manage tenants depending on the type of property), and then try to resell it for a higher value. Investing can be time consuming, and you may make some mistakes, but if you take the time to prepare and are open to learning more about the world of real estate then you can succeed. In order to become a great investor in anything, you have to be willing to learn and start with the basics. There are many proven models or investment strategies that have led to other people’s success and could eventually lead to your own.

Additionally, investing in real estate is far less risky than investing in securities. Real estate can be a great alternative to stocks or bonds. Investors have the opportunity to use leverage, which allows them to pay a percentage of the total cost of the property upfront and then slowly pay off the balance and interest over time. Investing in real estate can bring you lower risk, a better return on investment, and a great way of diversifying your portfolio.

Investors even have the ability to share some of the risk with other investors by bringing in partners on their projects. Good investors do not ignore risk; however, they do follow proven investment models and principles. It is not about taking risks but having the patience to find a good opportunity and being prepared to act on it quickly. You can never completely take the risk out of anything, but with good preparation, you can greatly mitigate it.

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You don't have to be an expert 

Another misconception about real estate investing is that you have to be an expert. Anyone who has the slightest interest in real estate can start investing. You do not have to have a master’s degree in real estate or have had a lifelong career in the real estate industry. If you have an interest and are willing to learn as you go, then real estate investing just might be the thing for you.

Furthermore, real estate investing does not require a large amount of capital to get started. Under the right circumstances, it may not cost very much at all. There are many ways to invest in real estate and feel like you are making the most out of your time and money. The most critical thing to know before investing in any type of real estate property is to know your investing goals. You should never enter into a deal without knowing what it is you want to accomplish.

There are different paths you can take in real estate. You can invest in rental properties, real estate investment groups (REIGs), real estate investment trusts (REITs), or flipping homes. There are even online platforms for those who wish to invest in real estate and want to join fellow investors in larger commercial or residential deals. This type of investment is known as crowdfunding.

If you are looking for something long term and are willing to manage tenants, then rental properties may be the right investment for you. If you want to own real estate without actually managing it yourself, then you may want to get involved with REIGs. For the investor who wants exposure to real estate without a traditional real estate transaction, then REITs may be for you.

Flipping homes may be best for an investor who has the time to oversee projects, but also has some experience with valuation, marketing, and renovations of a property. Each of these types of investments require its own level of capital and experience. In conclusion, real estate investing includes something for anyone who is looking to expand his or her investment portfolio.



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