In a tedious financial climate, many investors feel uneasy about the stock market and look to real estate as an alternative. Why? It’s because, over time, real estate has proven to be a reliable, attractive asset class since it:
- Grows in value over long periods and is less volatile than public financial markets
- Is a hedge against inflation and currency depreciation
- Is a productive asset that generates predictable income from rent
- Enhances the quality of the risk-return profile of a diversified portfolio
Achieving financial freedom is a universal goal, but getting there is no easy feat. That is why investing your capital wisely in assets whose value grows over time will accelerate your path to financial independence. In the process of doing so, education on the available tools and developing your investment strategy are key.
Unfortunately, misinformation can get in the way of you realizing your investing potential, which is why this article aims to debunk some of the most common myths about real estate investing. We aim to encourage you to take action: we’ll tell it like it is so that by the end of this piece, there’ll be no more excuses. Remember, it’s never too late to get started in real estate!
Myth #1: You should be rich and experienced to invest in real estate
It is no secret that real estate is inaccessible to the average Joe and it’s already demotivating to buy into because of how paperwork-intensive and time-consuming it can be. But that doesn’t mean you have to be a millionaire to tap into lucrative opportunities – you just have to find the right resources to guide you in making an investment decision that matches your capital and risk appetite.
Contrary to popular opinion, wealth and experience are not prerequisites for a venture in real estate, especially with the rise of digital solutions that democratize the asset class and make investing in it more accessible.
With anything that is new and unfamiliar, previous experience is always of added value. As long as you have the motivation to learn and seek out the industry’s best practices, an experience gap should not be a source of inconvenience. You have to equip yourself with smart questions and ask the right people to avoid leading yourself into a trap of buying into a deal with promises of returns that don’t ever materialize.
Do your research, be open-minded yet cautious, and plan out your financials against your preferred real estate investment opportunities.
Myth #2: Investing in real estate is risky
Generally, every investment comes with its own set of risks and degree of uncertainty, and if there’s one thing that’s been proven by the latest market performance, stocks and crypto investments are not always safe bets either.
Recognizing that risk is inevitable is essential in the short and long term because the market is unpredictable and highly volatile. The same applies to real estate since there is never a guarantee that a property will meet or perform above expectations.
A prevalent investment tool worldwide, real estate has long been vouched for by established industry leaders as a “hedge against inflation”. This means that during inflationary periods, property rents are expected to rise along with the prices of goods, labor, and raw materials. Hence, the one thing that generally keeps pace with inflation, and even surpasses it, is rental income from an investment property.
While the stock market fluctuates, real estate remains a key area of opportunity because of the stability it offers during financial uncertainty. What we are experiencing today is exactly that given consistent inflation concerns and periodic interest rate hikes in global economies. Several external factors including the Russian-Ukrainian conflict, ongoing post-pandemic supply chain disruptions, and the periodic increase of interest rates have interfered leading us further into financial disparity.
Sure, investing is a risky business and might be a headache to some, but it is a critical part of building long-term wealth. Those who are willing to take financial risks will be better prepared for the future.
Myth #3: Timing is everything
There is never a right time to invest, even when the market is at its peak. Global economies are constantly evolving, as they never stay in one position for too long.
Timing comes into play when considering your financial circumstances, because essentially, what differentiates one investor from another is their financial status which ultimately determines capacity and potential. For example, an individual with stable and consistent finances differs from one with short-term bearing debts like loans and credit cards.
Getting familiar with your finances will help you pinpoint the areas of weakness and support you in building a financial action plan to break down how much you can (and more importantly, willing to) invest and in what. Attempting to time out your investment will not bring you peace of mind, instead, commit to evaluating where you currently stand financially, what your financial goals are, and how to achieve them.
Myth #4: Real Estate investments yield immediate results
To make real estate investing work for you, patience is key. Real estate doesn’t work like its stock and digital currency counterparts, for one must view it as a long-term commitment which is typically 5 years recommended. You might think it is a long period to wait out, but this is because the best returns on real estate happen over time, as you generate more income from rent and the market value of the assets grows.
Another factor that plays into getting the benefits out of your investment is the initial choice you make! Don’t rush when selecting an investment property because research is a fundamental step in your investing journey. It is mostly advised that the properties you seek and ultimately choose have attractive return potential over the long term, stemming from both yield and capital appreciation.
With these 4 myths busted, we shed light on how real estate can help you realize your financial goals whether you’re a fresh, novice investor or one with years of practice. Knowledge-building and patience are essential to building wealth.
Based on your financial circumstances and risk tolerance, we encourage you to continue applying the best tactics that fit your investor profile, and just start somewhere. The road to financial autonomy is shorter than you think!
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