Real Estate Investments: 5 Inarguable Truths You Need To Know

Real estate investment is one of the most common investment choices, but making that decision is not easy. When you’re at the start of your investment journey, there are several factors and instructions to keep in mind. At the same time, you also want to take knowledge and guidelines from people who are more experienced in this field.

Real Estate Investments

Fortunately, skilled real estate investors and other successful individuals are usually more than happy to divulge their wisdom. Their advice might not always be simple or even straightforward, but it will help you form an idea or mindset. Even if you’ve got a fair number of real estate deals under your belt already, it never hurts to go over the inarguable truths about real estate investment. 

Realizing The Pitfalls Of Real Estate Investments

Looking for a magical deal that will solve all our problems is obviously a much too optimistic approach. We don't really want to lose any money at all, but taking risks is also essential at times. There are a lot of choices to make. So, reading up on some success guidelines is a logical idea. 

The main issue with real estate investing is that there are so many speculators as well as part-time investors in this area. Only a small percentage of investors really treat this investment as a type of business. This means that beginners and part-timers are at a disadvantage when they're in competition with full-time investors or REITs (Real Estate Investment Funds). 

As seasoned and successful investors will tell you, earning a fortune through real estate also involves learning a lot of lessons. It's certainly tempting to think of all those properties just earning you a passive income, but it's all too easy to forget the opportunity cost. Remember: buying real estate is relatively simple. Putting in the effort to make it desirable and starting a decent cash flow: that's a tall order. You also have to think about maintenance issues, careless renters, property managers, and a lot of other time-consuming projects at the same time. 

Before you’re overheated by all that real estate can throw at you, take a look at the following truths. They just might help you navigate this field and prepare for the tough time: 

1. Having Money Is Not a Replacement for Knowledge

Some potential investors might be under the misconception that they need a lot of money before they even think about real estate investment. This isn’t really true, especially if you have the right kind of knowledge. Even if you have no money at all, there’s always the option to partner up with someone you trust. 

Of course, having some capital at the outset will make your start at investing a bit easier. It will give you more options, for one. Again, though, having money doesn’t equate knowledge of the field or expertise within it. 

At the end of the day, it’s never a good idea to simply start buying up all the property you can (or make the cheapest deal you can find) without proper research and knowledge. Before signing or finalizing any kind of deal, take out some time and learn proper investment techniques. You might even want to consider taking some course or consulting a mentor beforehand. These steps will help to lessen the chances of a heavy loss. 

2. Knowledge Is Not Equal to Experience

We might have used the terms 'knowledge’ and ‘experience’ interchangeably until this point, but now’s the time to separate the two. With the huge advancements in technology, everyone has a lot of information on their fingertips at any given moment. Unfortunately, gaining ‘knowledge’ about real estate investment through a simple Google search is no replacement for gaining experience. 

Anyone can go online and type the keywords ‘real estate investing to get a number of results. When you start reading those articles and watching those videos, though, you don’t really know who to trust. Some of the content might even conflict with each other, so it’s possible to get more confused. 

The hard truth here is that one needs to take the time for proper learning. This might include the teachings of a mentor, some courses from a decent organization, and so on. Learn the theory of real estate investing as well as the basics to get started. It might delay the moment of your first deal and eventual earnings, but you’d be able to increase your potential with this step. 

3. Experience And Expertise Are Not Equal

The main difference between experience and expertise is apparent in their definitions. Basically, experience is a type of skill or knowledge that we get over some years. Expertise, on the other hand, is the knowledge or skill we get from practicing. The latter definition does not take into account the number of years that one has spent on any subject or activity. 

What does this mean for real estate investing? In a nutshell, it signifies that having experience in a certain kind of investing does not equal knowledge about real estate investing in general. 

Stock investing, for instance, is a completely different field. If you’re already a day trader and good at this field, it doesn't immediately translate to skill in real estate investment. 

Investments might have the same foundations per se, but they have different fundamentals. A stock trading expert will have to start at the beginning if they diversify to real estate. The methods and tactics for gaining profitable deals here require a completely different kind of experience and specialized knowledge. You can hardly go out and buy up any manufactured homes for sale, expecting them to be profitable. For that to happen, you need expertise and a bit of luck to boot. 

4. Expertise Won’t Give You Perfection

The truth to realize here is that even with experience and expertise under your belt, things are not always going to go smoothly. The most seasoned investors might find new challenges and pitfalls along the way. So, don’t get discouraged too easily. 

For example, an investor might have a lot of expertise in flipping home. Since this practice usually requires some renovation and remodeling, there might be some surprises in store. Some homes might be infested with black mold, just where you can’t see it. Others might have asbestos, a pest infestation, or even the nest of a rare bird that makes any further work impossible. Your work schedule might change at the last minute, bringing down your well-crafted plans along with it. Of course, this doesn't mean that you stop trying; instead, set aside some leeway in your plans in case anything goes awry. 

A seasoned mentor will tell you that problems are a part of life, especially when you're a real estate investor. In fact, we should be prepared for things not to go on as planned. The mature and level-headed way of handling problems, failures, setbacks and even losses will shape your future success. 

5. The Risk Is Not In the Investment, But the Investor

The risk of real estate lies in the investor, not the property they’re investing in. This means that we should be setting up a proper strategy right from the very beginning. The direction you're going in will determine how your investments go. When you put in some time, patience, and effort in the start, you might save yourself from a lot of huge pitfalls in the future. Without this initial input, beginners are all too vulnerable to losses and bad decisions. 

The learning method here could be either through personal experience or some proactive education. Keep in mind that the kind of real estate you want to invest in will require a specific set of skills. Residential properties are different from commercial rental properties. Owning the place where you house a business is a separate deal altogether. 

You can diversify your learning experience later; first, focus on the kind of investment you want to do. Are you going for long-term purchases, development, flipping houses, rentals, or something else? 

After choosing your focus, get busy in developing the relevant skillset. Along the way, also make sure to keep up your networking game. Building up the right relationships will get you in on the current deals in the market. Take a look and see what you can study to get ahead in the field. Who can teach you, support you, and might even share valuable connections with you?

Finally, you need to have enough knowledge to decide when to say no. There might be a load of seemingly excellent deals out there, but you have to be selective. Seek out how to make money from buying, having cash flow from the get-go, and how to find solutions for difficult situations. 

The Takeaway

Whether you’re a brand new potential investor or a somewhat seasoned one who has hit a rut, the points above will help to set you straight. Hopefully, they’d help you avoid several unnecessary pitfalls and on a lucrative path very soon. Start looking around for a proper course or mentor now, and then move on to the good stuff!