We are a Community. Our mission is to encourage every Filipino to learn how to Save, Invest their money and plan for their Retirement.

Oct 7, 2017

Debunking Five of the Most Common Misconceptions about Real Estate Investing

Relatively fewer people invest in real estate compared to those who take part in the stock market. Among the common reasons are fears and uncertainties that cloud the judgment of potential investors.

What these investors do not know is that they are missing out on this promising market, given that real estate has a value that appreciates over time. Lamudi even noted that it is a safer investment that allows investors to be flexible with their assets.

Investors must, however, be informed and well-equipped to avoid unwarranted risks. Here are some of the common misconceptions about real estate investing and how these spur the wrong idea about the market.

You have to be rich.

Perhaps, this is the most common misconception you will hear from people who would discourage you from venturing in real estate. While it is true that investing would not be as easy if you do not have enough in your war chest, it doesn't necessarily mean that you should have a battalion should you decide to push through.

The key here is financial security. If you have an ample amount of disposable income, then you have the freedom to invest it to make it grow in value. To illustrate, consider this situation: You have the savings to pay for the down payment of a condominium unit in Mandaluyong. Being in a busy city, the unit will naturally appreciate as the demand for housing near business districts swells.

Now, you have two options: Either you choose the rent-to-own track, meaning you can occupy the unit yourself, or you rent out the said unit while you settle the loan in predetermined terms. This way, not only will you have possession of the property, you are also settling your dues with no hassle.

Another option, especially for those who are just starting, is to find a venture partner. This will not only help distribute the financial burden but will also widen opportunities, as two heads work better than one.

If you still think you have to start with a lot of money, just remember that investing can be done in baby steps.

It's easy as one-two-three. 

Let's say you have overcome the first hurdle in investing and are stable to acquire more properties. Should you just lay back, enjoy your drink, and expect yields to just roll in?

The answer is no. Real estate investing takes a lot of work. It requires a clear understanding of the concepts not just in investing but also in law and the economy, among others. As Forbes put it, real estate is not really complicated at its core, but this does not mean the job is simple.

You would not go to battle without having a strategy, and the same goes with investing in a market as particular as real estate. Knowledge of the current market situation of potential locations is vital. You should be able to determine the demand for spaces in the area, as well as your target clients. For example, if you have your eyes set on a residential area with not so much retail presence, then it would be wise to look for nearby properties where you can set up commercial spaces.

For others, hiring a financial advisor is necessary. However, even with an advisor, you should not take the job so lightly as you would still have to manage your accounts, attend to your tenants' needs and concerns, and maintain your network.

The priority is keeping your property occupied.

While this is partly true, it is still important to profile your tenants. As Eric Tyson and Ray Brown from Dummies.com point out, investors often overlook the importance of tenant selection.

The crucial thing here is making sure your property is marketed in such a way that it would attract those who are most qualified. Investors can achieve this by targeting their advertising to a specific market.

Likewise, the investor should have the knack of determining early on if the tenant would want to stay long-term. Of course, this is on top of other qualities an investor should look for. It is essential to determine if the tenant can help you settle the mortgage and build the value of the property.

In a nutshell, the journey to having your property always occupied does not end with having tenants who come and go. It is always better to encourage longer commitments from them.

Go big or go home.

Most investors believe that you have to go big to get ahead in the game. This is not the case, however, in real estate investing.

This is especially true if you are a nascent investor—you can always start investing in small properties. For instance, you can snag a property within a stone's throw away from the University Belt and turn it into a viable student accommodation. According to Lamudi, the built-in demand for these student spaces makes investing in this area a great start to your real estate portfolio. And with an already determined market year in and year out, student spaces have the potential for greater cash flow.

Take note, however, that gains in this market are not instant as it would take time for you to get that steady and good cash flow. But this should not discourage you from starting small. As stated earlier, baby steps will get you a long way.

All you need is luck.

Luck should always be welcomed with open arms when it comes your way. However, relying on it will get you nowhere if you are investing in real estate.
It pays to do your homework and research on current market trends, allowing yourself to be well-versed on how you can utilize a property's location or how you can acquire a property at a fair price.

As they say, before you invest your hard-earned wealth into something, invest in your own plethora of knowledge first. Many misconceptions are rooted in superstition and unproven claims. Instead of trusting luck with the direction of your investment goals, you should use your own judgment and analysis of things to pave your way to your desired outcome.

Real estate investing, like any other type of investing and financial planning, requires only two things from investors: financial security and the willingness to take risks. Investors who are gunning for high rewards must, therefore, expect the high risks that investing could entail. It is important that this concept is taken not as a caution but rather as a challenge for potential investors, young and old, to thrive in this exciting market.

LAMUDI is a leading global property portal focusing exclusively on emerging markets. It offers sellers, buyers, landlords and renters a secure and easy-to-use platform to find or list properties online. Lamudi was established in 2013 in Berlin, Germany and it is currently available in Latin America (Mexico, Colombia and Peru), Asia (Philippines, Bangladesh, Indonesia, Myanmar, Pakistan, Sri Lanka) and Middle East (Jordan, Qatar, Saudi Arabia, United Arab Emirates). Within fewer than three years, Lamudi has established its presence as a key online real estate marketplace in the countries where it is operating. 

Property Investment in Makati City. Only P15,000 / month


Post a Comment

Sunlife Life Armor - AVAIL NOW!

Mostly Read Today

Follow Us by Email

© 2012. Powered by Blogger.