.png)
“Fear is the mother of foresight.”
Thomas Hardy
Fear is a powerful emotion that can keep us from achieving our goals. Whether it's fear of failure or fear of the unknown, we often allow our fears to hold us back. And when it comes to investing in real estate, many people are afraid of getting started.
Of course, it can be a scary proposition to put your hard-earned money into something that you may not understand well. However, with a bit of knowledge and some planning, most of these fears can be overcome. In this post, we'll explore some of the most common fears investors face and how to deal with them.
1. Fear of buying in a downward trending market. As with most investments, real estate is cyclical, and one of the fears of real estate investors is investing during a downward trending market. The key to addressing this fear is to educate yourself on the market dynamics, specifically the population growth, job growth, and real estate investment environment. If a particular market is experiencing a downward trend, simply look elsewhere. Don’t let one bad market scare you off. We’ll go over strategies in future articles.
2. Fear of paying too much. Many real estate investors shy away from purchases when prices are high, for fear of missing the "bottom." However, there are several reasons why this mindset is flawed. First, it can be difficult to time the market perfectly, and waiting for prices to drop may mean missing out on profitable opportunities. Second, even if prices do fall, there is no guarantee that they will reach the investor's desired level. And finally, even if an investor does purchase at the bottom of the market, they will still likely see a lower return on their investment than if they had purchased earlier due to the mechanics of paying down a mortgage combined with tax incentives such as depreciation. In short, while it is important to be mindful of market conditions, real estate investors should not be afraid to act when they see a good opportunity.
3. Fear of reliving people's "horror stories". Horror stories abound of people who have lost money in real estate investments. But just because someone you know had a bad experience doesn’t mean that you will. In fact, there are many potential rewards to investing in real estate, as long as you do your homework and select properties carefully. Aside from the obvious financial rewards which come with selecting the right property and managing it well. Many overlook the satisfaction of providing housing for people who need it. And if you choose to live in one of the properties you own (called “househacking”), you can save a considerable amount of money on your housing costs. So don’t let the fear of hearing a horror story keep you from reaping the potential rewards of investing in real estate.
4. Fear of financing. The fear of not being able to find financing is one that many people have when it comes time for them to invest in real estate. These worries are assuaged by the fact there are more lenders today than ever before, and you can even team up with your friends or family members if they also happen to be interested! One good practice in financing is to reach out to your network and see if anyone has any recommendations for lenders. Once you have a few options, you can compare terms and interest rates to find the best deal. You may also want to consider partnering with another investor who can help with the financing. This can be a great way to get started in real estate investing without shouldering all of the risks yourself.
5. Fear of getting started. One of the fears people face when it comes to investing in real estate is the fear of getting started. Many people feel that they need to have a large amount of money saved up before they can start investing, but this is not the case. There are many ways to get started in real estate investing with very little money. For example, you can look for properties that need minor repairs and are being sold below market value. You can also look for properties that you can rent out, which will provide you with a steady income.
For many people, the thought of investing in real estate conjures up images of expensive properties and high risks. However, the reality is that real estate investing can be a very lucrative way to build wealth. In fact, over the long term, real estate has outperformed stocks and other traditional investments. One reason for this is that real estate is a physical asset, which means it can provide a hedge against inflation. Another advantage of real estate investing is that it offers the potential for high returns.
So don't let the fear of real estate investing stop you from reaping the rewards. Educate yourself on what to watch out for, consult with a professional if needed, and get started today! With interest rates still relatively low, there's no time like the present to invest in real estate and watch your money grow.
Have you invested in real estate before? What tips would you give others who are thinking about taking the plunge?