These are the 10 most common real estate investing myths and unfortunately, you may still believe some of them!
Myth # 1 - Good Ol Days
People look back at real estate investing in the past with such nostalgia, like it was the glory days. If you believe that all the good deals were in the “good old days”, then you’re missing out on all the good deals to be had now. Yes, things are different than they were in the old days, but you know what? I was there in the old days and they weren't that good!
I would argue that it is a whole lot better today than back in the old days for several reasons:
- We have new technology that makes it more efficient to get to sellers.
- There is access to more data allowing us to make decisions faster.
- We have unprecedented low inventory and huge demand which leads to multiple offer situations.
Times are great. Don't look at the good old days as the time when investors made all their money. There's a lot of people making a fortune right now.
Myth # 2 - What You See is What You Get
This is the myth that properties available for purchase by investors are easily seen in the general marketplace. The truth is that in real estate investing, investors purchase their best deals off-market.
We have a mantra at Freedom Mentor that says, “We’re not looking for houses, we're looking for humans”. Our goal is to connect with sellers. Ideally they're motivated, but motivated or not, we're trying to connect with an off-market seller. We're not searching for a foreclosure or a fixer-upper, we are seeking out the owner of the property.
Off-Market Deals: At the center of this philosophy is the idea that the best deals are the deals you can't see. In real estate investing, what you can see is NOT what you can get. Real estate investing is about doing the deals that other people can't see. The best opportunities come from off-market deals. And that's both now and back in the good old days.
Myth # 3 - Who You Know
In real estate investing, it's what you know, not who you know. The best opportunities are NOT found through networking simply because people don’t give away great deals. The best deals are off-market deals. And the best off-market deals are done by discovering them, not by networking for them. Real world experience taught us that deals found through networking are secondhand deals.
The best deals were done before you ever knew about them. So, it’s about what you know; how to find great deals in different market cycles and how to structure great deals. And for those of you who don't know anyone in your marketplace, it doesn't hurt you at all. In fact, I put together a video on the subject of real estate investor club or real estate investor associations, where I describe the benefits and drawbacks of both: The Skinny on Real Estate Investor Clubs
Myth # 4 - My Area is Bad
Often beginner investors assume that their location is a bad place to do real estate. It’s the myth that the “grass is greener on the other side”. The truth is, there are diamonds in your own backyard. You'll find that many of the best deals you'll ever do in real estate investing are close to home.
Now, understand that each area has their strengths and weaknesses. For example, in Hawaii or parts of California, your average price point is extremely high. Whereas in Kansas the average sales price is considerably lower. However, you will make more money in California because the price points are higher. The bigger the deal, the more money you make. If you're in Kansas, you may need to do several deals to make the same amount of profit as one deal in California.
There are strengths and weaknesses of every area, but where you are right now is a great place to invest in real estate. Bloom where you're planted.
Myth # 5 - Bad Timing
This is the myth that the timing is bad because of difficulties in your life or what's going on with current events and economic uncertainty. You know what? There will always be challenges both at home and abroad. The one thing we have learned from history is we don't learn from history. We humans have been doing this to ourselves for eons, so the only bad timing is to procrastinate, do nothing and wait for better times. Instead of worrying about all that nonsense, get started and become more productive right now. The timing is perfect right now!
Myth # 6 - Not Enough Time
For some of you, the reason the “timing is bad” is because you don't have enough time in your life. The fact is, you can invest in real estate part-time and still be highly successful. The principles behind why real estate investing works so well part time in this video: Can Real Estate Investing Be Done Successfully Part Time?
Saying you don’t have enough time is a myth. Whatever amount of time you have is the right amount of time for you to get started. If you're part-time, you just use the time you have to be productive and do as many deals as your schedule permits. In fact, less time can be helpful for a real estate investor because you don’t waste time doing things that are ineffective. You have no choice but to use your time wisely. Many of our apprentices are successful part-time investors and keep their full-time professions. Don't buy into the myth that you don't have enough time!
Myth # 7 - License
Can you believe the myth that you need a real estate license to be a real estate investor still exists? If this myth were true, we would only have 1.8 million homeowners in America because that is how many real estate agents there are. Instead, we have a hundred million homeowners. How can that be? How can you buy a home without a license? Because you can! You have the right to buy real estate and you have the right to sell what you own. So yes, you can be a successful real estate investor without a real estate license. Most of my apprentices don't have a real estate license and they're highly successful.
I have a video called Should Real Estate Investors Get a Real Estate License? on the benefits of being a licensed agent if you're investing in real estate, but that's more aimed at full-time investors. You can be an incredibly successful real estate investor the rest of your life and never get a real estate license.
Also, what if you live in the state of Illinois? Well, the Illinois legislature, thanks to the Association of Realtors, passed a law that prohibits anyone from buying more than one property per twelve months without a real estate license. So, if you're in Illinois, this isn't a myth. But for everyone else, you don't need to be licensed.
Myth # 8 - Good Credit
This myth is the same mentality as "what you see is what you get". People fear the requirements of obtaining a traditional bank loan or mortgage and assume it’s the only way to finance real estate. Traditional financing is narrow set of rules that restrict who can obtain such loans. All those rules get thrown out the window when you target off-market deals and are able to structure creative financing. When you work directly with the seller, you have tremendous flexibility in how you structure the deal. For example, sometimes you can sell a property while you're under contract and you don’t ever need to get a loan.
This video explains the different ways to creatively finance a property purchase that doesn't involve traditional financing rules: Creative Financing Comparison (Owner Financing vs Subject To vs Contract for Deed vs Lease Option)
Good credit is necessary to be a successful real estate investor. In fact, here are 5 Ways to Buy a House with Bad Credit. However, as you improve as an investor and are able to build your credit, that’s a good thing because it allows you to get long term fixed rate loans for rental property investments. So there are benefits to having good credit, but don't think if you have bad credit you can't be a highly successful real estate investor. I have mentored plenty of people who have had bad credit when they started. We made a lot of money together and then later when they had better credit they began to use it.
Myth # 9 - Money
The myth that you need a lot of money to invest in real estate comes from the same paradigm as “you need good credit”. A mortgage broker will tell you that you need to put 20-25% down for an traditional investor loan. They will try to box you in with this mentality but there are creative ways to structure deals with little or no money. This is because real estate is something you can control with a contract and that contract can sometimes be executed without any money. Which means a lot of money can be made with no money.
When I started in real estate investing, I was homeless living out of my truck. I did my first few deals with no money. I'm living proof that money is not the prerequisite for successful real estate investing. And I have mentored people from rags to riches too, like Erik, who went from food stamps to $500,000 in 2 years. Here's Erik’s Rags to Riches True Story.
Bloom Where You’re Planted: Having money does give you more options on what techniques you can use when structuring a deal. However, even when you have money, you'll discover that oftentimes you don't need to use it. You can use techniques that don’t require a lot of money to finance your short term investments and then you can use your treasure chest of cash for your long-term investments. Yes, money can be helpful, but if you're starting with very little or even none at all, then that's where you get started. Bloom where you're planted.
If you want to learn more about all the techniques you can apply without having to use any money, I have an amazing free video training course with 25 hours of trainings on creative real estate investing and flipping houses:
Creative Real Estate Investing and Flipping Houses Course (FREE)
Myth # 10 - Simple
The final real estate investing myth is that real estate investing is simple. How hard can it be? You buy a house cheap that needs a lot of work, fix it up and put it back on the market. You make a bunch of money and you go do it all over again. The reality is that real estate investing is deceptively complicated. It looks simple on the surface, but underneath, there are a lot of landmines. In fact, I wrote a book called Real Estate Investing Gone Bad that gives 21 real world examples of things that can go wrong and most people would never think of them because they're not intuitive. Don't believe the myth that successfully investing in real estate is simple. Real estate investing is complicated, so you need to know what you’re doing and do things right. The fastest and easiest way to make sure you know exactly what you're doing and you do everything right the first time is to hire a mentor. Freedom Mentor is recognized as the leading real estate investing mentoring organization and so if you want to be the best, you have to learn from the best, and you can do that by applying to our Apprentice Program