One thing I’ve realized over the years is that there are a lot of myths and misconceptions surrounding property investing & the requirements one needs to become an investor.
I’m not sure how these myths came about, but it’s my responsibility to teach you the truth about all things real estate.
It upsets me when I see more seasoned investors spreading false information to people who are genuinely looking to better their lives through real estate.
There is enough room in this industry for all of us, and I’m going to make sure I’m setting my supporters/mentees up for success.
Let’s get into it.
MYTH #1 - YOU NEED A REAL ESTATE LICENSE TO BE AN INVESTOR
If you’re looking to acquire property please understand that you do not need to be a licensed agent. If you meet the credentials from the bank than you can obtain a mortgage, and from there you can start to shop for properties. (To learn more about acquiring your first property and the bank requirements click here)
I appreciate my real estate license because it allows me to get paid multiple times during the process of purchasing a new property, however it is not necessary. I’ve been property investing for 13 years now, and it was my choice to become a licensed agent 6 years ago, it was never required.
MYTH #2 - ALL DEBT IS BAD DEBT
Having credit is very important when investing, and people who have worked hard repairing their credit often fear debt. I’m here to tell you, FEAR NOT!
All debt is not bad debt. What makes a debt “good”? Well I’m glad you asked, if your debt is paying for itself than it is good debt.
A good example of this would be rental properties. With rental properties your tenants are paying the mortgage debt for you, on top of you receiving extra money to pocket.
MYTH #3 - YOU NEED A LOT OF CASH
If you see a house selling for $150,000 please do not think you need $150,000 UP FRONT to purchase that home.
When you get approved for a mortgage your down payment can be as low as 3.5%. That is why it’s so important to due your due diligence before even applying for a loan, just to ensure you qualify for the best rates possible.
And remember working on your credit is part of your due diligence!
MYTH #4 - YOU NEED A CONTRACTOR TO DO EVERYTHING WHEN REHABBING
When hiring a contractor to rehab a home please keep in mind that you don’t need to hire them to do every little thing, that’s just going to cost you more money. Contractors charge you for the cost of materials and for work labor. Why pay somebody for labor you can do yourself.
I’m not telling you to try to do your own drywall or fix the electrical & plumbing, clearly that takes a certain level of skill. However, if a job is more simple like refinishing floors, painting, or installing a new backsplash, I’m certain you can do it yourself.
Now let’s put it into perspective:
On average a contractor may charge $500 to paint a single room. However, the paint needed only cost about $125. So if you decide to remove the contractor and just paint yourself, you’re looking to save $375.
$375 may not seem like a lot of money to some people, but let’s look at the bigger picture...
If you have a 4 bedroom that needs fresh paint, you can save a total of $1,500. That money you saved can leave you wiggle room with your budget, so you won’t be in the hole if there are unforeseen expenses during rehabbing or that $1,500 can go towards your down payment for your next property.
Knowing how to cut down on unnecessary expenses is a must if you want to be a successful investor. It’s all about making money, not giving it away.
MYTH #5 - AS A BUYER YOU HAVE TO PAY A REAL ESTATE AGENT
As a buyer you do not pay any fees or commission to your real estate agent, that is the seller’s responsibility. However please understand that there may be other closing cost.
Closing cost includes a variety of expenses that are not included in the purchase price. These fees include: attorney fees, a title search, taxes, lender cost and some upfront housing expenses such as homeowners insurance.
MYTH #6 - THE MARKET WILL ALWAYS INCREASE
The real estate market is like any other market - you’ll have your highs and lows. Just like the stock market can crash, so can the housing market.
Before purchasing a flip property be sure to do your due diligence. Research the housing market forecast of the geographic area you’re looking to purchase. Be sure to consult with a seasoned professional(s) (that you trust) if you need more insight.
MYTH #7 - SECTION 8 IS A BAD IDEA
For some odd reason many landlords refuse to open up their properties to Section 8.
Section 8 is a program that allows private landlords to rent their homes and apartments at fair market rates to qualified low income tenants.
I love Section 8 for two main reasons:
REASON 1 - If I know I plan on flipping a property as a rental I can save money on the rehab process. For my Section 8 properties I don’t add any features that would be expensive to repair if tenants damage it. Don’t get me wrong, I still ensure that the home is appealing to the eye and can be a place my tenants can raise their family comfortably, however I don’t do anything to the property that would be too costly for me to continuously fix or replace. I take this approach because as a landlord it is my responsible to keep the home up to par, no matter what damages my tenant may cause.
REASON 2 - Section 8 is guaranteed paid rent ON TIME! As you begin dealing with tenants you’ll quickly learn that some people feel as though they should live for free and they aren’t always reliable when it comes to paying their rent on time. However, Section 8 is a guaranteed check in the mail from the city on the same day every month. Section 8 can cover a tenants entire rent payment, or a vast majority of it. Even if it does not cover the entire payment, 9 out of 10, it will cover the mortgage and the remaining balance is just my residual income. So whether the tenant is late or not, the mortgage is still being paid on time.
Also, the less time I spend hunting down my rent money, the more time I’ll have to find my next investment property.
If you ask me I say yes to Section 8 and guaranteed residual income!
MYTH #8 REAL ESTATE IS A FULL TIME JOB
Real estate is whatever YOU make it. Can it be a full time job? Definitely, but it does not have to. The best thing about real estate (other than the freedom it provides) is that you determine your hustle.
Are there any myths you know of about real estates or are you questioning something you've heard and would like more insight? Leave a comment below!
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