There are a many myths about real estate investing. Most are based on a grain of truth – and a lot of misunderstanding.
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Is real estate investing only for the wealthy? Can you buy with no money down? Do you have to know the “right” people? Let’s answer by looking at some of the myths of real estate.
1. Real estate investing is for the wealthy. Money helps, but my first real estate investment was a $3,500 lot – which I sold for a profit two weeks after I bought it. Small deals, partners, low-down deals, or just putting aside $7 per day for a couple years until you have enough money for a downpayment – these are some of the ways to start with a little and invest in real estate.
2. “0 down” isn’t possible. I sold a rental property for $1,000 down because I trusted the buyer to make the payments, and I wanted the 9% interest and higher price. He could have gotten a cash-advance on a credit card for another $30 per month and made it a “0-down” deal. “No money down” means none of YOUR money down, and yes, it happens.
3. “0 down” is the best way. If you don’t invest some of your own money, you’ll have higher payments. You’ll also spend more time finding suitable properties, and pay more for them (generally cooperative sellers want more for their cooperation – I do). There are 0-down deals out there – they just aren’t always worth doing.
4. You need experience. Experience helps, but you get it by investing. Start with common sense, ask how you can lose money, be willing to learn the numbers, and you can start where you are.
5. Some investors have a “knack” for making money. Sort of. More accurately, some just took the time and risk to learn the market and continue their education.
6. You need to know the “right” people. It helps, so start the process. Talk to investors, real estate agents, landlords, etc.
7. You have to be great negotiator. If you learn to run the numbers and make the offers based on them, you can be the worst negotiator and still do okay.
8. You need insider knowledge. Understand one deal, and you are on your way. Read and read more, but the best “insider” knowledge comes from experience.
9. Fixer-uppers are safe. People have the idea that doing the work themselves is the safest way to assure a profit. Not true. Mis-planned “fix and flips” have bankrupted even experienced investors. Most poorly purchased rental properties will only eat a little money every month.
10. The key is lowball offers. The numbers have to work, and you need a plan. You can offer MORE than the market price and make money investing in real estate, if you understand creative financing – and how to do the math.