You would be surprised just how many misconceptions about investing in real estate there are. In this industry, the sheer number of strategies and investment methods means that, while your options are endless, information often gets mixed up. Some things that apply only to one area or type of investment suddenly apply to them all. This naturally leads to some major myths.
For new and would-be real estate investors, understand the truth about investing in real estate enables you to make better decisions for your future portfolio. Once you understand what really applies to you and your strategy, clarity will follow. The task of investing in real estate can be complex and frustrating.
Your best guard against a major headache is to fully understand what is and is not within your reach and responsibilities.
5 Myths About Investing in Real Estate, Explained
You don’t have a voice in decision-making.
This myth doesn’t come from nowhere. In certain real estate strategies, it’s true — you don’t have a say in decision-making. When it comes to REITs, investors are dealing with real estate, yes, but the process of investing is much more like that of stocks. The investor doesn’t direct any of the outcomes. They simply trust the REIT to work in their favor.
This, however, is untrue of other investment strategies. While most would say that the division comes between “passive” and “active” investing, the line is more blurry than that. While it’s true, investors have the most say in the direction of the trajectory of “active” investments, “passive” investments can involve owner agency as well.
In the case of turnkey real estate, this is most apparent. While considered a “passive” way to invest in real estate, an owner of turnkey properties ultimately decides when and where to invest. They build their portfolio, they consult with their turnkey provider and develop a strategy tailored to their needs and desires.
You have to be rich to start with.
Again, this misconception comes from the REIT world. In many instances, these entities go through the SEC 506(c) regulation. This demands that investors be accredited. This isn’t the case in all investment strategies, but this is where that barrier to entry can seem a lot more daunting than it is. While a net worth of $1 million is a way to accreditation, it is not the only way.
Not only that, but accreditation is not always a requirement investors have to worry with. In this case, while some strategies can be costly, investing in real estate, on the whole, is widely accessible through financing.
If I delegate management, I’ll be out-of-the-loop.
As a real estate investor, it’s important that you don’t end up with a control problem. There are certain personalities that feel as though they must have their hands in and on every step in their investment career. Delegation is scary for these people. We feel like if we’re not in the trenches ourselves, we won’t know what’s going on.
Not so. While turnkey providers do have a reputation for being uncommunicative, this isn’t the case with Memphis Invest. We prioritize building a relationship with our investors — keeping you informed and on top of your investment goals.
Be sure to check out: 3 Areas of Turnkey Real Estate Investing That Should Be Hands On!
Investing out-of-state is too risky.
A common misconception regarding real estate investment is the myth of the local market. If we’re honest, we’re all more comfortable with the familiar. We also like to be physically present when there is a problem. Because of this, we gravitate towards our local markets with the notion that our familiarity and presence reduces risk.
This, in fact, is not true. While first-hand knowledge can be helpful, it does not guarantee success. For many of us, our local market might not be ideal for single-family investment properties. This comes down to things like local housing demands, job growth, and cost of living. It could very well be too expensive to invest where you are.
When you trust your management team and your turnkey provider, investing out-of-state becomes second nature.
You need experience / a license to invest in real estate.
Experience is great. It’s absolutely beneficial for real estate investors to have some prior experience in the industry. However, you don’t have to be a real estate professional or otherwise experienced in investing in order to be successful. You don’t need a license, a degree, or accreditation. You only need the will to begin.
While beginners are more likely to fall prey to common investment mistakes, having a turnkey partner by your side dramatically reduces this risk. Because you can rely on their experience in every area of investing in real estate, you can learn as you go, without the risk and without the headache.
Ready to get started? Give us a call and talk about your future as a turnkey investor.