People tend to get stuck before investing in real estate among all the investment opportunities. It is probably because of the various myths about real-estate investments. Therefore, it is important to debunk certain myths to decide where to invest their money thoughtfully. So, if you want to understand more about the myths and all the risks involved with investing in real estate, you must go through the myths mentioned below and educate yourself about the facts. It is also advisable to consult a real estate agent to understand better the complications and risks involved in real-estate investments.
Myth 1: Land Scarcity
The most common myth around the world is that the land is limited. This and the increasing population make people believe that the prices will continue to rise because of the growing population and land scarcity. Meanwhile, many studies have claimed that if the population exceeds the expected limit, the land will still be abundant. Hence, it nullifies the myth that there is no land to invest in.
Myth 2: Prices Will Keep Rising
The myth is that real estate prices keep increasing and never fall. It is because of the considerable rise in property prices, especially in developing nations. But it doesn’t mean that property prices keep rising everywhere in the world. For example, property prices in Japan and US have decreased in the past decade and remained like that.
Myth 3: There Is a Pattern in Past and Future Real-Estate Prices
People often bet on the future of real estate by analyzing the pattern of past real-estate scenarios. It is a myth that these patterns repeat themselves as many factors affect economies, for example, cross-border investments, trading, outsourcing, global ventures, etc. These factors bring considerable changes in real estate dynamics that nullify the myth. Hence, it is better not to invest in real estate depending only upon their past performances.
Myth 4: Flippable Investments
There is a myth that buying and selling a property repeatedly in a short period of time incurs a good profit. However, the fact is that it incurs a substantial transaction cost with each payment. Moreover, it is a hassle to look for potential buyers and negotiate a deal as per your terms. Hence, it is not wise to rely on flippable real-estate investments.
Myth 5: Buying Over Renting
People have this deep-rooted idea that purchasing a property is better than renting because it secures their future. Also, it is because of the emotional sentiments people tend to attach to the properties they buy.
However, the truth is that buying can be a better option in certain cases, whereas renting should also be considered in some. For example, if a person’s job doesn’t allow him to settle in one place for more than a year or two, it is better to rent a house rather than buy one.
Myth 6: It Is Safe to Invest in Real-Estate
Another myth about real estate is that it is the best way to invest money and doesn’t have many risks involved. However, with time and many stories about real estate crashes, it is evident that there are many risks involved in real-estate investments like information risk, liquidity and leverage risks, counterparty risks, bad tenant risks, etc. Hence, it should not be taken lightly, and one must consult a real estate agent before investing in a property. Nevertheless, one never wishes to lose their money, do they?