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Why Real Estate Should Be Avoided By Full Time Investors
Getting into the world of investing is a good move. These days strategic investing seems to be one of the only ways to really grow your money. At least that’s what the many quarter-page advertisements in the newspapers tell us.
Can you put your full trust it in a bank? Well after fiasco of the mortgage meltdown, you surely can’t trust them 100%. Money has to move around in order to make money. The problem is that if you invest in the wrong things or you invest in too many things you’ll end up hurting your chances of making good returns.
One investment that can really hurt you if you plan on investing in other things such as the stock market or money markets, would be real estate. If your goal is to be a full time investor, then real estate is something you might want to avoid for the following reasons. This is contrary to common belief and investment mumbo-jumbo. And here is why.
Real estate takes way more money to get into then what you think
When you’re a full time investor this means you’re probably going to be living off of your investment income right? The rate of returns you can get are going to be modest even if you’re very good at what you do. So what do you think would happen if some unexpected expense come up that required you spend a lot of money?
Well this is what can happen when it comes to real estate. The returns are decent, but small problems can easily lower them or eliminate them altogether. Seeping walls, pest infestations, legally-required upgrades. You name it. What’s worse is the expense can cut into profit from other forms of investing.
Everybody goes on about how to leverage mortgages or obtain creative financing to minimize the initial capital outlay. But nobody tells you about the costs of maintaining a house. Probably because those very people who are the most vocal about buying more properties make their cut out of you from purchases. Not maintenance.
Real estate requires more research then you might want to put in
When you invest in stocks or even the money markets it’s far easier to do research. This allows you to know what you’re getting into. You can control the risk better, because you can always know what you can afford to lose and put provisions in place in case this does happen.
Even better. All you need are financial reports, cash flow statements, business outlooks, etc, to make an investment decision. With how the world is going digital these days, you can do all your hardcore research in the comfort of your own home.
With real estate it’s not like this. You might have been misled on how glamorous it really is. You have to do a lot of research by running about the place, and this requires time and energy. With the exception of flippers, a real estate investor would have probably visited a site at least 3 times before finalizing a buying decision. And this have yet to include the many hours you might have to spend supervising remodeling works and prospecting for new tenants.
Managing tenants can be a very big time drainer as well. To charge a premium rental, surely you expect to provide premium services. This means attending to problems in a timely manner, and again, supervising repairs or maintenance works to ensure you are not being taken for a ride by your vendors and suppliers.
If you’re investing in other things, the commitment you have to make on your real estate holdings is going to distract you from your other investments. This self-initiated deprivation of your time and resources will inevitably lead to bad business decisions. Even seemingly small mistakes can add up to irreversible financial problems in future.
Real estate is way more of a liability than other forms of investing
If you’re going to be a full time investor when it comes to certain things, then you don’t want to worry about anything you don’t need to right? Well if you were to get involved in real estate alongside stocks for example this wouldn’t be the case.
The good thing about stocks is that when you buy them you own them. You don’t have to worry about being sued or tenants. Stocks and the money markets are all solitary forms of investing. Real estate has way more liability and one lawsuit can really set you back for a long time.
And if you think insurance is going to save you from a financial disaster, think again. Insurance agents promise the moon to acquire new accounts. But when it comes a time for you to file a claim, especially a substantial one, investigators pull out all the stops to either deny your claim or increase your premiums. And yes, Hollywood movies could very well give you a heads up on what you could be up against.
Real estate is an investment that if you want to get into you should do it full time and nothing else. If you want to invest in other things like FOREX or stocks in your portfolio, then they’ll require your full attention in order to be successful. Real estate will dominate most of your time and energy if you include it. Balancing them becomes a huge challenge as soon as you add real estate into the mix.
There’s no problem if you intent to start off as a part-timer. But you must acknowledge that in order to attain a goal of a full-time income from passive real estate income, committing your time and resources on a full-time basis is not a choice… Unless you have already been brain-washed by another one of those gurus conducting free seminars “valued at $197” on the pretense of selling you a $1997 weekend workshop. Get rich by doing real estate part-time… Right…
And if you are actively trading in and out of financial markets on a full-time basis, you want to avoid the big distraction of real estate hanging over your head.