Reasons NOT to invest in real estate
We are not your typical blogger/youtubers on personal finance! We are not going to be big flashy showman and sell some BS hype machine about the latest get rich quick scheme in real estate. Lately I see many YouTubers talking about getting rich fast with real estate investing!
The truth is that there are many reasons to not invest in real estate they will not tell you. They will just show off the parties, mansions and lambos with little context or background. Not to mention the fact that it is a particularly challenging moment to invest in real estate with high prices, high interest rates, low inventory, etc.
reasons not to invest in real estate
20 years experience
Take it from a guy that has been intimately involved in real estate on all levels for decades, what they are saying is partially smoke and mirrors. There are legitimate reasons to invest in real estate with a clear sense of what is involved and a long term view. I know the reasons to invest in real estate and more importantly the reasons NOT to invest in real estate.
Anything for Subscribers/Likes
I know, we are not following the traditional model to do or say anything for likes and subs. I should probably be more sensational if I want more views on our content. But I would like our content to be truthful and be born from our own experiences in the real world. And when it comes to real estate investing, I have vast experience. They will not tell you why not to invest in real estate.
Here is One Thing (50% gone instantly)
Here is one thing the YouTube gurus will not tell the truth about. Over the long haul with real estate investing, on average about half (50%) of all profit will be eaten up through maintenance costs. You heard me, at least half. They will tell you that once you cashflow positive all your cares in the world are gone. You just travel the world on exotic vacations and check your account each month as those rent checks come in.
Sure, rent checks will come in. But throughout the life of managing that property things will break large and small. See, they will tell you how much they love real estate because it is tangible, you can touch it. Yes, but that also means that Mother Nature and people “touch it” every single second of every single day. And that makes things break over time. Absolutely no way around physics! reasons not to invest in real estate 1 of 100!
But, Isn’t It Passive???
Nope, real estate is not passive. If you are not fixing and management shit, then you are paying someone else to do that. Sure, it typically does not involve going into an office each day, unless you own like 50 units plus. But it is not that passive all the time. There are times when it can be beyond stressful to manage physical real estate, taxes, tenants, people, repair work, contracts, and more. reasons not to invest in real estate continued! reasons not to invest in real estate
At the end of the day, owning and operating private real estate investments should be considered a version of a small business. Not as busy as operating a deli, but it is none the less a kind of small business enterprise. In this case your product is delivering quality and efficient rental space to your tenants. The fact that it is not as passive as it seems is a reason to not invest in real estate, unless you are prepared for the commitment.
I Love Real Estate
So, as many Money Viking readers and viewers know, I personally enjoy it. But I get so annoyed by the gurus out there that paint this rosy picture of walking into a bank, being handed a million bucks and then just buying properties all over the place, next thing you know they are millionaires driving lambos! NO! reasons not to invest in real estate
We have dozens of content on why you should investing in real estate and are your prepared?
3 Reasons You May Want to Avoid It
Real estate investing can be a complex and challenging endeavor. Here are three reasons why it can be difficult:
Capital Intensive & Not Liquid:
Real estate investments typically require a significant amount of capital upfront. Whether you’re purchasing a property or investing in a real estate project, you’ll need substantial funds to make the initial investment. This can be a barrier for many individuals who don’t have access to large amounts of capital or struggle to secure financing. I do not care what the gurus tell you about no money down, that is playing with fire and many have lost their ass that way.
Real estate markets can be volatile, subject to fluctuations in supply and demand, economic conditions, and various other factors. These fluctuations can make it challenging to accurately predict and time the market, leading to potential risks and uncertainties for investors. Changes in interest rates, local economic conditions, and demographic shifts can all impact property values and rental income. Not all real estate is created equally, and there are many factors that can effect the market, most of which you have no control of.
Real estate is really a market by market assessment.
Real estate investing involves complex decision-making processes. Investors need to consider factors such as location, property condition, potential rental income, financing options, market trends, and legal regulations. Analyzing and assessing these factors accurately requires knowledge, experience, and thorough research. Additionally, managing properties, dealing with tenants, and understanding tax implications can further complicate the investment process. Those are some reasons not to invest in real estate.
Massive Maintenance Issues:
As mentioned before, at times over half of profits will go back into trying to maintain the property. Remember, property is a physical thing that is constantly exposed to the elements, wear and tear. There is always something about to break on real estate unless it is constantly maintained.
It can be a success, see our other content on why to invest
It’s worth noting that while real estate investing can be difficult, it also offers potential rewards such as long-term appreciation, passive income, and portfolio diversification. Many successful investors have navigated these challenges by educating themselves and building portfolios over time. Check out our real estate section that covers many of the benefits, how to and drawbacks. Those are some reasons not to invest in real estate.