9 Valid Reasons(or excuses) To Avoid Real Estate Investments

By on May 22, 2015

To be frank, investing is not for everybody. Many people get by pretty well without ever putting their money into investment vehicles like stocks, unit trusts, real estate, etc. Usually the people who tell you that you are ignorant are the ones who have a “high return opportunity” to sell you.

You don’t have to feel that you have missed the boat or late for the party when you have your money in a place that does not give you “16% returns each year”. You don’t have to feel that the train have left as real estate prices are consolidating. And you definitely don’t have to feel out of place when your friends are talking about how much they have put their money into REITs at the social gathering.

You are just not into properties. You will have the biggest laugh anyway when your friends lose their money on properties in a neighbouring country. And here are some valid reasons you should stand your ground.

I don’t have the time.

Everyone have the same 24 hours a day to do their stuff. Your work and personal commitments simply don’t allow you the time to manage your rental property. On some days, you don’t even have time to have a proper lunch. Let alone attend to a tenant’s problem with the air-conditioner.

Savvy salespeople will argue that if you knew what the numbers of the next lottery will be, you will find time to buy that ticket, no matter what. That is really true. If only we live in such a world. If you encounter such responses from salesmen, remember to remind them that they need to visit the psychiatrist for their inability to differentiate fantasy and reality. No investment is a sure win unless you are telling fairy tales to kids at the childcare centre.

I don’t know if a house is a good deal.

There’s nothing to be embarrassed about when you are unable to properly value a property. It’s not as if you don’t know how to get online from your iPhone. THAT could be embarrassing.

Don’t you just hate it when real estate agents or condominium launch promoters give you that “you don’t know how much this is worth?” look? I have a secret to tell you. They don’t know it as well. They are just motivate by their commission cheques coming at the end of the month when you sign on that dotted line. If the deal is so good, they should be buying it for themselves instead. It’s a “sure-win” investment according to them anyway.

The fact is that there are good deals around all the time. But what is a good deal depends from individual to individual. If you re unable to feel them out, you should put your money somewhere you are much more comfortable with.

Properties are overpriced.

There are basically 2 types of market watchers when it comes to real estate. The first ones are those that think that prices will fall. The other one, obviously are the ones who feels that things will go up. The tragedy is the mass media often appear to stand on the side of the second type.

People who are recognized as “experts” are often invited to shows on television to predict the market. And they often promote the illusion that prices are strong and going up. If you dig a little deeper, you will usually find that these experts have a stake in prices going up. This is why it is very hard to take their word for it. Remember 2008? Even a week before the implosion became official, “experts” were still talking up how strong the real estate market was. Well… we know what happened next.

If the average person can tell that real estate is overpriced. It is more often true rather than false. Because it is the middle class that is driving the market. They are the segment that makes the most sensible investment choices. The irony is that they are also most vulnerable to scams.

I don’t like to get into debt.

The next time someone tells you that debt is your friend, you should slap him as hard as you possibly can. Because I’ve never had a friend who demands that I give him a sum of money each month and threaten to take my house away if I fail to do so.

Using debt to invest is a dangerous game. Don’t let the “gurus” tell you otherwise. They have a hidden agenda for your debt. You are using money you do not have to place a bet. Can anyone with a sound mind honestly say that that does not sound like gambling?

Looks like the investment did exactly what it was expected to do

Looks like the investment did exactly what it was expected to do

Forget about the whole hocus pocus of good and bad debt. Leverage and gearing are just fancy words that sound sophisticated. The only good debt there is is one that does not need you to repay. And we all know that that does not exist, even in story books. If you are someone who is not at all comfortable with going into debt, stay away from real estate. Because you will be swimming in debt for decades.

I need a job to get a loan.

When you do not have a stable job, you will be crazy to take on a loan into the hundreds of thousands. There is a word used to describe financing for people who have little to no income to buy real estate. It’s called predatory lending. It might be legal, creative and innovative. But just be reminded that the sole loser in the end will be the borrower.

Banks will get their profits, agents will get their commissions, brokers will get their cut, lawyers will charge their legal fees, sellers get to cash out. And you? You get an appointment at the foreclosure hearing.

If you are seriously thinking about buying a house without a stable income, you have a much bigger problem than wealth accumulation. You need to see a doctor. The type who treats patients with mental problems.

I don’t have the cash for down payment.

More and more promoters are designing advertisements leading with the “no down payment” headline. I can only say that I’m worried for the innocent rookie investors who take up the bait.

Common sense will tell you that you shouldn’t buy something you cannot afford. An investment should be avoided even more so when you cannot afford a 20% down payment.

There is a phrase used to describe these “zero to little down payment” deals. It’s called creative financing. And if you were to interview a professional accountant, you will find that “creative” is the type of word that gets a “xxx” rating in their profession.

Even though creative financing is legitimate, you can expect to be charged very high rates for them. The type of rates that you pay through your nose and don’t even realise it. Do the logical thing. If you can’t afford it, run.

What if prices go down?

Agents and market watchers will make you aware of real estate cycles. And there is never a better time to buy other than NOW. When prices are high, they say that whatever properties they are selling are poised to appreciate even more. When prices are low they say that it is the best time to snap up bargain properties. NOW is always the best time to buy real estate no matter what the economic condition is.

There is really no way you can argue with that analysis. It is just their opinion. It is also so convenient to blame the unpredictable market when you lose money based on their inputs and advice. If you really bought at the top, you only have yourself to blame for being an easy prey to promoters who only have one objective in mind. And they have no problem saying anything to attain that objective.

I don’t want to be a landlord and deal with tenants.

The “gurus” conducting seminars will have you believe that you will be stupid to manage your properties yourself. You can easily outsource the hassle to property management companies.

REALLY? Oh that is just so convenient. So all you have to do is write a cheque to settle everything? Don’t be so naïve. You are not born yesterday. Or are you?

This is the real estate investor lifestyle?

This is the real estate investor lifestyle?

So other than spending your hard earned money on an investment property, you have to spend some more to get someone to manage it. But you can relax. Because the rental you collect will pay off the mortgage and other expenses with a lot to spare. You must either be dreaming or you have yet to do your numbers.

The only way hiring a management company is worth it is when there is economies of scale. Meaning, multiple properties. Once you do the numbers, you are not going to hire one. Trust me on this.

Being a landlord is a huge hassle of a commitment to take up. If you cannot come to terms with that, you are not ready to manage your own rental property.

I’m too young.

Every insurer will tell you that you are never too young to buy insurance. Every bank will tell you that you are never too young to start saving. Every skin care retailer will tell you that you are never too young to care for your skin. You see the trend here?

People who make a profit from properties being bought will always say that you are never too young to start investing in real estate.

If you are a young chap, there are so many adventures and challenges to look forward to in life. Why bog yourself down with a high ticket investment at such a young age? Sure, you can start young, but will what you will be sacrificing be worth it?

Remember the time when your parents told you that you have decades of work to look forward to when you grow up and you should just enjoy the care-free life of school while you are still young?

The same applies here. You are never too young. But doing it young mean that you are missing out on the good stuff. You are missing out on life. Your youthful energy and zest is something that you can never get back.



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