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Successful people know the value of investments. There are several ways to become extremely wealthy in life, but few have the same track record as investing in real estate. Real estate investing is one of the best wealth generators in the world. There are arguably more real estate millionaires than any other category of business. So what is a “real estate investor” and how can you become one?
The term “real estate investor” often refers to individuals and businesses who buy, sell and renovate homes. However, you don’t have to be a professional house flipper to hold the title of real estate investor. Anyone in any industry who actively chooses real estate as an investment option is a real estate investor. Some people choose real estate as an alternative to stocks, bonds and mutual funds and others choose it add adding real estate to their existing investment portfolio. The question that is often asked: is it accessible to everyone?
Here are three of the most common misconceptions about real estate investing.
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You must be wealthy to invest in real estate
When most people think of real estate investing, they think of mega-rich celebrities and their massive real estate portfolios. Just because you don’t drive a Lamborghini or don’t receive a salary from a multi-million dollar trust fund doesn’t mean you can’t invest in real estate. There are plenty of ways to start investing that require very little cash outlay.
Traditional wholesaling and joint ventures are just a few methods that require little to no capital. Hard work and dedication are really all it takes to become a very successful real estate investor. With the right methods, you can flip your first home with very little money and possibly without ever spending a dime.
You need good credit to finance real estate deals
If you are applying for a traditional bank loan, you will need a sufficient credit score for the approval process. However, there are several other ways to secure financing for your real estate investments. Let’s take a look at two of the most common financing options that require little to no credit approval.
Transactional financing or flash financing
Transactional financing is a short-term loan that is borrowed and repaid in most cases within 24 hours. This type of financing is common during a back-to-back double close. It allows an investor to secure the A-to-B side of a real estate transaction. Once the investment is secured, the investor can sell the B to C side property. After they collect the money from that close, they immediately pay back the initial payday fund loan. In most cases, these loans are backed by the asset purchased and not by the investor.
Hard money financing
Hard money financing is another popular strategy that real estate investors use to acquire investments. This type of loan is known as a bridging loan. It is a short-term loan that allows the investor to purchase a home without a lengthy application or approval process required by traditional banks. Hard money loans are asset-based, meaning they are not dependent on the investor’s creditworthiness. They are normally used in renovation projects where the investor buys a home at a discount, then remodels the home and resells it for a profit, then repays the loan. These loans rarely exceed a period of 24 months.
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You need experience to invest in real estate
The fact that you have never invested in real estate should not stop you from investing. A little research goes a long way. Experience is gained through actions. After all, to become a skilled driver, you need to drive. That doesn’t mean you have to get in a sports car and hit the track. It means you start driving around your neighborhood, your town, city, highways and eventually interstates, etc. It is no different with real estate investing. Your first investment attempt should not be a 500-room condominium with a 60-page purchase agreement. It should be an affordable single family home in areas you are familiar with.
There is no doubt that you can start investing with little to no prior knowledge or experience. However, if you want to speed up your learning curve, you can enlist the help of a seasoned professional as a mentor. A successful investor can teach you not only what to do, but also what not to do. Being able to avoid costly rookie mistakes is a huge advantage and will increase your chances of success. Many successful business professionals have mentors and real estate is no different. Be sure to do your research to make sure you seek advice from a qualified advisor with years of real estate investing experience.
There’s a reason so many people turn to real estate as a means of generating wealth. Simply put, it works. Don’t get discouraged by false information and myths about what it takes to get started. The only thing stopping you from becoming a real estate investor is yourself. One of the world’s most famous investors Warren Buffett once said: “Be sure of your success, even if no one else isDon’t procrastinate, do your research and start your journey.