4 Common Real Estate Investing Myths Debunked
There are myths that plague the world of real estate investment. Some of these do no real harm, but others prevent investors from reaching their full potential. Worse, they can cause missed opportunities and poor decisions when real estate investors buy into misconceptions about the industry.
~Chris Clothier, Memphis Invest
Recognizing and challenging any limiting beliefs about real estate is the first step in becoming a successful real estate investor. So many women severely limit what they accomplish or worse, they don’t even get started, because they believe one of the following myths:
Myth 1: You Need to have a Lot of Money or Time to Invest in Real Estate
A lot of women I speak to say “I’d love to invest in real estate and I will as soon as I’ve got more money.” Or “I’d love to invest, but I don’t have time to find a property or be a landlord.”
Women think they’re limited because they have limited resources. I thought the same thing.
My husband and I were searching for a 4-unit property to buy in Los Angeles and were stuck and unable to find the right investment because we were only thinking that we had to use our own capital, credit, or available time.
Tony Robbins says, “There’s no lack of resources, just a lack of resourcefulness.” When we became educated about the possibilities out there and realized the many creative ways we could partner with others to become investors, we became much more resourceful.
The truth is that you don’t need to have a lot of money and/or you don’t need to have a lot of time. You don’t even have to use any of your own money! You just need the education and creativity to become more resourceful.
Myth 2: You have to do it yourself.
This is a big myth in real estate. Not only do you not have to do it by yourself, if you want to truly grow your wealth it’s almost impossible to do it by yourself.
If you limit yourself to your own capital, credit, and time, you could accomplish quite a bit but eventually you will hit a wall. If you partner with others and utilize OPM (Other People’s Money) or OPT (Other People’s Time), there’s no limit to what you can do.
If my husband and I were just trying to invest by ourselves, we might have maybe been able to get a four-unit multifamily building, a “four-plex,” (not bad), but by partnering with others we were able to become part owners in over 1000 units. In certain cases, we were able to get an ownership stake by using none of our own money (it was all OPM). And in other cases, we just put in some money and someone else found the deal and is managing it for us. All we do is enjoy the quarterly checks (it’s all OPT).
Myth 3: You have to start small
Most people start out buying a duplex or a single family home to rent out. I did. It’s common, but that’s definitely not where you need to start or even where it’s most prudent to start.
One of my mentors, Brad Sumrok, started out with a 32-unit building. He learned about the beauty of leverage and purchased an apartment building first. He was able to turn around that building and buy another and another. Within 3 years he’d earned enough to be able to “retire” from a six-figure management job. His passive income became greater than his paycheck. Now he teaches others, like my husband and me, how to retire from the rat race through investing in apartment buildings.
Starting bigger has some definite benefits. One of the best things about having a bigger property is that you can hire property managers (usually for small properties, property management is cost prohibitive). When you have a property manager, you have someone else who deals with leasing out to tenants, handling evictions, fixing toilets, receiving 3 a.m. phone calls for keys, etc. You actually can spend less time on a bigger building and leave yourself more bandwidth for planting more trees.
We will talk more about the beauty of leverage that you get from bigger properties in the next chapter.
Myth 4: Investing in stocks is safer/better investment than real estate.
This whopper is generally perpetrated by stock brokers or other financial professionals that get paid to put you into these types of investments.
First, it’s important to know that any investment has risk. It is possible to lose money in real estate just like it’s possible to lose money in the stock market.
That being said, a well-educated real estate buyer who buys a cash-flowing property, is much more likely to make money than a stock market investor.
This type of real estate investment pays you cash every month, it provides many tax benefits (even though you make more money, you often pay less in taxes), and it won’t go bankrupt and disappear on you like a company whose stocks you own can. It’s the best way to significantly grow your net worth.
As President Franklin D. Roosevelt said “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full and managed with reasonable care, it is about the safest investment in the world.”
That was true when he said it back in the 1930s and it’s still true today.
100 Day Blogging Challenge – Day 2
Monick Halm is the author of the Real Estate Investor Goddess Handbook: Everything You Need To Know To Start Investing in Real Estate Like a Goddess. She is the co-founder of Real Estate Investor Goddesses, an educational platform for women real estate investors, and is herself a real estate investor, syndicator, and developer with over 12 years of investing experience in single family, multi-family, and RV/mobile home parks. She and her husband own over 1000 rental doors in 6 states. She is also a certified interior designer, Feng Shui expert, certified NLP and Money Mastery coach, and attorney. Monick is passionate about real estate, design, and helping women to thrive. You can connect with her on the Real Estate Investor Goddesses Facebook Page or on twitter as @monickpaulhalm.