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Anna Karamazina

26.11.2022 15:00

Real Estate investing myths

It's imperative that these real estate myths be honored and dismissed, If one wants to avoid getting entangled in the emotional aspects of real estate investing and make financially sound opinions. In this composition, we will list down some of the foremost real estate investing myths and try to debunk them.

Myth. Land is Scarce

The most common myth propagated by real estate clerks and other proponents of real estate investing is that land is scarce. There's only a limited quantum of land in the world. This coupled with the fact that the population of the world is adding everyday gives credence to the conclusion that the land prices of the world will continue to rise constantly since there will always be a deficit of land.

Looking at the figures will explain that this isn't the case. Originally, it's true that there's a limited quantum of land in the world. Still, technological development is making it possible to make more effective use of this land. Studies have been conducted in this area and their conclusions state that indeed if the population of the world were to rise four fold, there would still be an abundant quantity of land for all humans to survive and thrive!

Studies have also been conducted which state that the population of the world is about to stabilize. This means that the population growth period has reached its peak and now the number of people will remain more or less constant. Hence, the “land is scarce and thus precious” sense is nothing but the propagation of a myt!

Myth. Land Prices Always Go Up in Value

This sense is currently largely developing husbandry which has witnessed an unknown smash in the real estate sector in the past decade or so. The price of land in these husbandry has gone over 10 years in the past two decades. As a result, people in these countries have come to believe that the price of land always rises i.e. the real estate always goes up in value.

This is far from the truth. One can find examples of real estate crashes where prices have dropped to the tune of 40 to 50, If one were to consider developed husbandry like Japan and the United States. In Japan, the prices have gone down and have continued to stay there for the better part of the last decade.

Myth. History Performance Predicts unborn Performance

There's a common tendency amongst hopeful real estate investors to decide the trends that were present in the property request in history and produce an extremely bullish unborn script. One needs to understand that the world has experienced an abecedarian shift in the last decade or so. Business arrangements like outsourcing, free trade and cross border investments by chains had created an unknown smash in the arising husbandry. The future doesn't supposedly hold any similar revolution in its future. In case, no unanticipated profitable revolution unnaturally changes the profitable paradigm, it's largely doubtful that the performance of the once many times gets repeated in the unborn times. Investors laying on a reprise performance are in for a rude shock!

Myth. Real Estate Investments Can Be Flipped fluently

This isn't a veritably popular myth. Still, before the subprime extremity broke out in the United States, stories of one made real estate millionaires who owe their fortunes to nothing but buying and dealing real estate on espoused money were common.

These bloggers propagated the merits of flipping i.e. buying and dealing real estate several times in a veritably short period. The idea was to speak of the profit arising from the price discriminational and converting it into cash. Still, what these tone-placarded exponents forgot to mention is the huge quantum of sale costs that are associated with any kind of real estate sale worldwide. Thus, the further parcels you flip, the further sale costs you dodge. These sales cost quantum to anywhere between 2 to 5 of the price of the property in question.

Piecemeal from the sale costs, changing a willing buyer and negotiating a deal is a tedious and time consuming process. Flipping parcels thus causes immense drainage of time as well as coffers and thus should be avoided as far as possible.

Myth. Buying is Better Than Renting

Property buyers all over the world have an emotional connection with the real estate that they buy. From traditional times, buying real estate has been considered the “ grown-up ” thing to do for a person. This decision has no fiscal backing and is embedded in the thinking that having a property to your name ever makes one economically more secure.

If we consider the fiscal aspects this is easily not true. There are some situations when buying is easily the better thing to do whereas there are other situations where renting is the stylish option. The ideal thing to do thus depends on a case to case base. 

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