Everyone loves to give advice. When coming from your friends and loved ones, usually it is well intended. These are the people who have your best interests at heart and want to see you succeed. And when it comes to real estate, whether buying your first home or tenth investment property, many people are happy to step forward with the best gems of wisdom they’ve garnered throughout the years.
Real estate is a complex topic. It can put you on the fast track to financial security and success. Or it can be one headache after another. Everyone has a story with a lesson learned. And, of course, not all of the advice you hear is good. Some recommendations are out of date, irrelevant, or just plain bad. The question is how do you determine the good from the bad, and how do you ignore harmful advice without hurting the feelings of those you love? Let’s take a look at some of the most common beliefs about real estate investing that you may hear as you evaluate your next steps.
Avoid Real Estate at All Costs
If someone you love has had a bad experience in real estate, they will often tell you to avoid buying an investment property. They may have struggled with cash flow or had a bad tenant who caused a lot of problems. In any case, they want to help you avoid the same heartache they experienced.
However, achieving goals means you can’t avoid all risks in life. It’s far better to keep your eyes open for an opportunity and be prepared to act when the time comes. An experienced real estate team with investment knowledge can help you avoid many of the pitfalls often associated with owning income properties.
Every investor has a different level of risk tolerance. If you’d prefer a safer way to invest, read our post How to Generate Passive Income From Your Primary Residence.
Nothing Ventured, Nothing Gained
On the other side of the spectrum, you have people who believe in “nothing ventured, nothing gained,” They might inspire you to take risks and scoop up every piece of property you can get your hands on. While some level of risk is always required, you don’t want to go overboard. These well-meaning friends or relatives may know someone who knows someone who made a fortune by flipping houses or who was lucky enough to buy a property that quickly exploded in value. To some people, buying up real estate represents a way to get rich quick.
It’s not unlike playing Monopoly, where the winner takes all and everyone else loses. In reality, strategic real estate investing is not a zero-sum game, but a scenario where multiple people benefit. The investor has a chance to build their equity and generate additional income. At the same time, the tenant finds a great place to live. Still, you want to do extensive background research before purchasing any property so you know whether or not the long-term potential is worthwhile.
Trust Your Gut
Your intuition is valuable, but it’s important to remember that it is based primarily on your current level of knowledge combined with past experiences. If you’re new to real estate investing or have had a string of luck, good or bad, your “gut feelings” might not be reliable. Instead, it’s often better to leave your emotions out of the equation and make your decisions based on the numbers to determine whether a piece of property is financially feasible.
Whether buying your primary residence or a second-income property, good advice is essential. The posts below are a great place to start:
- Is it Better to Pay Off Your Mortgage or Invest Your Money Elsewhere?
- Growing Your Wealth Through Real Estate Even in a Recession
- A Complete Guide to Real Estate Investing in Guelph
Buy With No Money Down
Buying with zero down is an idea that has a lot of appeal for some aspiring investors, especially as real estate values continue to rise. The goal is to buy more properties that will hopefully rise in value and generate passive income each month as the rent payments come in. Unfortunately, this tactic is usually for those selling investment-related courses than for actual investors! It may sound easy, but it is also risky.
In Canada, you need 20% as a down payment to purchase an investment property unless it will also be your primary residence. To get around this rule, some investors use private loans to cover even the down payment. However, if property values fall or unexpected expenses arise, you then find yourself with a massive amount of debt that you struggle to pay off. Conservative, well-thought-out investment strategies take time to see a profit but are far more likely to pay off in the long term.
Buy Rental Properties For Passive Income
The idea of making money without hard labour is very appealing, even if it’s just a few hundred dollars a month at first. And owning a rental property is one of the best ways to make that dream a reality. However, nothing about real estate is truly “passive.” Even when everything is running smoothly, you still need to keep your eyes on your investments and maintain the property as the years go by. There will always be the occasional phone call about something that needs to be urgently fixed or repaired. It’s just a fact of life for a real estate investor.
Hiring a property manager can alleviate most of the stress, but you will need to run your numbers carefully to see if it is financially viable. If it eats too much into your budget, you may find yourself barely breaking even or holding the property at a loss for the time being. Earning passive income may be the ultimate goal of real estate investing, but it takes time and effort to get to that point.
Having the right team of experts can be the key to succeeding as an investor. The resources below will help:
- How An Experienced Guelph Real Estate Team Can Help With Your Investments
- Questions To Ask Potential Property Management Firms
What Should You Do With the Abundance of Advice?
As you can see, real estate investing can be complex. However, it remains one of the best and safest ways to grow your wealth in the long term. To succeed, the right advice is critical, and you should have an experienced team of real estate agents, financing experts, and tradespeople to guide you through each step.
All the same, you can still maintain positive relationships with those friends and family members who are so eager to help but whose information is sometimes a little misguided. The best way to bypass their advice is to listen with appreciation while never allowing them to feel ignored.
You may not follow their instructions to the letter, but you can often glean the kernel of wisdom in what would otherwise be terrible advice. For example, the underlying message of “avoid real estate like the plague” could simply be to perform due diligence and proceed with caution. If you thank your loved ones for sharing their story, you can soon be on the path to a grand real estate adventure as they cheer your every success.
Are you looking to invest in Guelph or the Tri-Cities? We can help you spot the perfect opportunity just for you! Reach out today at email@example.com or call 519-826-7109 for more information or get started.