Everyday, hundreds of people enter the real estate investing business. For every one person that commits to getting started, there are a handful that remain on the fence. The biggest thing holding them back is most likely fear. As much as they may want to get started, they are afraid of failing in one capacity or another. They end up circling around the business without ever diving in. This cycle often continues for months, and – in some cases – years. Fortunately, it doesn’t have to. You alone have the ability to overcome your fear and change the course of your life. Here are the five most common real estate fears, and how to overcome them:
1. Fear of a bad market: Everyone has their own opinion about the real estate market. While there is a lot of information out there, it can be difficult to decipher what it all means. Because of this, it is easy to be swayed by the opinions around you. Negative people will tell you just how bad of a market it is. They will base this on one or two offers they may have made that were rejected. Maybe they had a buddy who tried to sell a rehab property and got stuck with it much longer than anticipated. This doesn’t mean that the market is bad. There are dozens of reasons why their offers weren’t accepted or their rehab couldn’t sell. The real estate market is cyclical, yet constantly changing. The key is to know as much as you can about where you are investing. If a particular market has a downward trend, simply look somewhere else. There are plenty of markets out there to invest in, so don’t let one bad market scare you off.
2. Missed the bottom: Unfortunately, you can never time the market exactly right. It would be like trying to hit a moving target. Instead of fearing you missed the bottom, look at where you are right now. Your market always has room to grow. Too many investors sit around and wait for a boom in their local market and forget to focus on improving what is in front of them. Even if the market increases quickly, don’t fear you have a bad investment. You may have to pay more when you purchase, but you will also see a greater return when you sell. Don’t get too caught up on trying to get the absolute lowest price or interest rate. There are still profits to be made, regardless of where and when your get started.
3. Horror stories: For every nine investors who have had success investing, there is one who has an ugly story. Unfortunately, it seems to be easier to recall the one negative voice over the nine positive ones. Keep in mind that there are a multitude of reasons as to why people are not always successful. One person might tell you they spent six long months on a rehab and barely turned a profit. Perhaps they miscalculated their numbers or produced sub-par work. Maybe they listed the property 10% over the true market value and had to wait out a price reduction. The point is that you should never take a horror story as an absolute truth. Making a blanket statement about a particular market or style of investment doesn’t make much sense. What happened to someone else doesn’t mean it will happen to you. Instead of not investing based on the worst case scenario, look at the potential rewards you will gain by doing so.
4. Finding financing: This is a popular one for many new investors. It is no secret that loan guidelines and underwriting standards have changed over the years. To purchase an investment property, you need a strong credit score, a significant down payment, ample reserves and low debt to income ratios. You also need to be able to wait up to 45 days for your loan application to be accepted. Maybe you are self-employed and therefore don’t show all of the income you receive. This doesn’t have to be a deal breaker. There are more financing options today than ever before. In past years, there were only a handful of hard money lenders in every market. Today, there is more than enough to choose from. Additionally, more people are becoming interested in real estate investing so it is easier to find a partner to invest with. Financing is a hurdle, but it is something you can definitely overcome.
5. Getting Started: If you are reading this ,you are on the right track. There is an abundance of real estate information out there. While each individual has different goals, you can find an investing blueprint in a number of different outlets. Start by joining a local real estate investment club. There is usually one in every state. You don’t need to be an expert to join, just sit and listen to the people around you. Everyone has a story that could help inspire you in one capacity or another. Lack of knowledge should never be an excuse to not get started.
Don’t let these fears stop you from getting started. Your first few deals may be filled with anxiety, but you will get the hang of it sooner rather than later.