If you are interested in real estate investing, either to become a homeowner or to increase your net worth and create passive income, this article is for you. There are many myths you will hear about real estate. Many of these myths are perpetuated because they used to be true, but relying on that outdated information can keep you from reaching your financial goals.
We are always here to help you find creative solutions that make your real estate goals more achievable. Talk with one of our loan officers any time, and keep reading to learn more about common real estate investing myths and why you should ignore them.
5 Real Estate Investing Myths
Myth #1: You need a lot of money to get started
You may think, like many people do, that a 20% down payment, in addition to closing costs, is standing in between you and your real estate goals. Many hopeful investors don’t know how they will purchase a home or an investment property because saving 20% for a typical home in Southern California means having $100,000 or more in the bank and that is daunting.
However, there are many other options for mortgages that don’t require nearly that much cash to get started in real estate. First time homeowners in particular can take advantage of special programs that require as little as 3% down, with closing costs assistance and other perks available for borrowers with good credit and debt-to-income ratios.
Myth #2: Debt is bad and should always be avoided
Many Americans have been taught that all debt is bad, and try to avoid it at all costs. However, there is a significant difference between consumer debt and debt being leveraged for an investment. Consumer debt, like a balance on your credit card, requires you to pay interest for something that is almost certainly decreasing in value over time. When you borrow money to purchase real estate, you are buying an appreciating asset that can be leveraged to open up financial opportunities for you.
Leverage, or using borrowed money to invest, can be a powerful tool in real estate. While excessive debt can be risky, responsible use of leverage can amplify returns and help investors acquire more properties.
Myth #3: Passive income means income that requires no effort
While real estate can provide passive income, it doesn’t mean there’s no effort involved. Property management, maintenance, dealing with tenants, and staying informed about market trends all require active involvement.
This should not discourage you from investing in income properties or creating those passive income streams. However, having a realistic idea of the work and expenses associated with your investment will help you set yourself up for success.
Myth #4: Flipping houses is easy money
Reality TV shows often portray house flipping as a quick and easy way to make substantial profits. In truth, successful flipping requires extensive knowledge of the local market, renovation expertise, a solid team, and the ability to accurately estimate costs and timelines.
If you think flipping houses is the right fit for you, we can help you identify the right type of mortgage for your goals and make sure you are financially equipped for the unpredictable process.
Myth #5: You need 2 years of W-2 verified income to qualify for a mortgage
If you are not a traditional employee with a W-2, you may wonder if investing in real estate is possible for you. Self-employed borrowers, gig workers, and other applicants without traditional income verification will be excited to learn that there are other options available!
Ready to learn more about investing in real estate? Contact us any time!