#1 reason why people don't invest in real-estate?

Question

When I talk to people who have never invested in real-estate before, half of them have no interest in it, while the other half are fearful of it.

I usually investigate the people who are fearful of it and try to understand why they're afraid.  Most of them will always talk about the horror stories of bad tenants or midnight tenants(tenants who leave without notice, before their next payment), evictions, and how stressful it is been a landlord.  They hear one or two bad stories and then associate every possible aspect of it to be bad, without investigating further on the good aspects.

I've never had a rental property, tenants or played the role of a landlord, but the way I see it is this.  If you have a good tenant screening process, do your due diligence, and manage risk, most of the time, you won't have bad tenants.  Sure you'll have the occasional rotten egg, but most of the time you won't.  If you're property is vacant, and you just put in some random person, regardless of who they are, then the odds of having a bad tenant increases.  With all the tools at our disposal(tenant screening,  due diligence, etc), we can control the odds into our favor and have a better probability of getting a good tenant.

This is what I tell people who are afraid of rental properties and REI in general.  I've been discredited by these same people because I have no direct experience with it.  So I'm asking buy and hold investors and property managers alike: "am I right about this subject?  Or do I have no idea what I'm talking about?"

Thanks in advance!

Aly W. · Answer

My husband and I have been investing for 8 years, steadily building our rental portfolio. Over that time, we've had a few evictions. 2 had red flags up front, and we learned painful lessons. Sometimes a good tenant's life goes off the rails...it happens, and there's no crystal ball to predict it. And then there are costly repairs, which can be band-aided sometimes, and other times require major cash outlays. Taxes and insurance always go up, and so should rents.

But overall, it's a profitable, long term investment. Most of our friends have no interest in investing, because all they hear are the horror stories....but what other stories are there? A tenant that pays the rent on time and properties that never need repairs or improvements have no stories. The stories of building equity aren't interesting, at least not to everyone.

Chad Hotovec · Answer

Account Closed I think everyone has their own reasons.  I found some primary ones to be limiting beliefs, fear of the unknown, and deviating from the crowd.  I'm working on my first property, so I'm not that experienced either, but I keep on building my business.

Account Closed · Answer

@Chad Hotovec

I see now,  I've always had a hard time understanding that concept.  The moment I read the part "whatever comes after the 'but'", my mind drew a blank and made me feel puzzled.  Do you have another word for it?  Like when someone tells me to explain something clearly, I draw a blank.  When someone tells me to explain it simple, I explain it to them clearly.  The difference in words makes a difference for me, I'm weird that way.  :)

I can completely relate to your past situation as well.  I thought I didn't have enough of my own saved money, so I put REI on hold, gone to school to get a "higher paying job", and save up a big nest egg that way.  Then I learned on a deeper level, what the power of OPM has for REI and the wheels started moving again.  Networking, applicable knowledge, mentors and action are important for me!

Account Closed · Answer

@Aly W.

Interesting that you say that it's not a get-rich-quick scheme.  Maybe that's another reason why people avoid REI.  They developed the expectation that it's a get-rich-quick process till they face the reality and see that it's a get-rich-slow process instead!

Then again it also depends on what kind of finances you use for your REI.  If you only use money from your own savings, yes, you'll be 60 before you know it.  If you use OPM for your investments however, it will go MUCH faster!

Chad Hotovec · Answer

Account Closed I've seen 'Limiting Beliefs' defined as what ever come after the 'but'.  For example. "I'd love to get into REI, BUT I don't have the money."  This person has a limiting belief that money is the only way they can get into REI.  I myself had this specific belief for almost a year before I knocked some sense into myself and figured out how to expand my network to educate myself on other options.

I couldn't agree with you more!

Account Closed · Answer

@Chad Hotovec

Interesting answer.  Could you explain more about what "limiting beliefs" are?  Could it mean like a person is close-minded and doesn't budge on their opinions, no matter how silly it is?

I also like to note about "deviating from the crowd".  It's so sad to see so many people who have great potential, but they don't act on it because they're afraid of embarrassment or how their personal image is seen from others.  Pursue your goals even if people in your life don't support you, because eventually, you'll come across people who WILL support you!

@Aly W.

I don't know if I'm getting philosophical here, but everything in this world has a balance.  Nothing is purely good or purely bad and if it was, we would be suspicious.  You got the gurus who only talk about the good and then you got the washed up investors who talk only about the bad.  If you investigate in either case, you will find the opposite.  The reality with most people, is if something good happens, it's not talked about because it's almost treated like a expectation.  If the littlest bad thing happens, you get everyone talking and criticizing!

Aly W. · Answer

Very true @Clayton Rokosh! We still try to encourage friends to invest, if they're interested, but most just see the investor/landlord glass as half empty. Short term vision...it ain't get rich quick ;)

#1 reason why people don't invest in real-estate?

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