Posts Tagged ‘buyer due diligence’

3 Real Estate Investing Myths

People fear loss more than anything. Faced with a possible gain of many times their investment they will balk and refuse to act. Their emotions are guiding all decisions without regard to rational thought. This in many ways explains why most wealth is held by less than ten percent of the population. Just add a little procrastination and rest assured the deal will have passed on to someone with better instincts.

Throw in a little laziness and a willingness to believe whatever they hear that justifies their fear and there you have them—the two most wealth-preventing myths about real estate investing that were ever conceived. And those two are the parents of the third.

Those myths are, of course, fear-based. They are also myths that would not exist if it were human nature to educate themselves about a thing before making up their minds about it.

What are those myths?

1. Real estate is a gamble.
2. Real estate is risky.
3. There is no way I can possibly invest in real estate.

Naturally, Myth No. 2 follows logically from Myth No. 1. Assuming, of course, that logic goes into the thinking at all when someone determines these things.

Many people honestly believe that real estate investing—or any type of investing at all, really—is all about luck. These types of investors throw their money at anything that looks good to them. But they haven’t taken the time to educate themselves on what is a good investment. So what “looks good” to them is based on a purely emotional reaction—or worse—a guess.

Real estate investment cannot be accurately compared with, games of chance. Real estate investment is not a guessing game. Real estate investment involves looking at financial documents and determining from them how much and where you invest your money. It’s not about guessing—it’s about fact finding.

And Myth No. 3, well…that’s the biggest myth of all. Anyone at all can invest in real estate, if they are willing to take those first important steps. You can buy real estate with little or no money. You can buy property using other people’s money and just doing the work. Education will reveal many real estate investing opportunities.

Ouch! Most people are simply not willing to take action. They feel they should not have to learn something new. They already have been to school and learned everything they needed to know. The extra money they have is burning a hole in their pocket and they can’t wait to give it to someone who tells them they will get rich quick. So that is exactly what they do and wonder why they are not wealthy.

There is risk, of course. Anytime someone sets out to learn a new skill—even real estate investing—they will make a few mistakes. But that is all part of the process. As time goes on, you will be more successful. You shouldn’t toss your life savings into the first deal. Simply start out small and keep your capital in reserve. That way you can pay for unforseen expenses. Seek advice from others in your field of interest. Most will gladly share their knowledge. But you must invest the time to learn how.

What really is a risk, is neglecting to educate yourself. When you neglect your financial education you are losing more money than you can imagine—not only the money you invest if you choose to invest without gathering the facts and figures, but also the money you will never make if you choose to let fear disable you.