Real estate is the investment option that buyers are most likely to become emotionally attached to out of all those that are offered. As a result, many fallacies regarding real estate investing are used to help consumers rationalise their emotional choices. It is crucial to identify and debunk these real estate misconceptions if one wishes to avoid becoming emotionally involved in real estate investing and make financially responsible decisions. We will attempt to dispel some of the most common myths about real estate investments in this article.
Myth: Land Is Hard to Find
The idea that land is limited is one of the biggest myths that real estate agents and other supporters of real estate investing spread. There is a finite supply of land on Earth. This, together with the fact that the world’s population is growing every day, supports the idea that land prices will continue to rise forever because there will always be a lack of it. A look at the numbers, however, will show that this is not the case. First off, it is accurate to say that the world’s available land is finite. However, technical advancements are enabling more effective use of this area. There is plenty of land available for all people to survive and thrive, according to studies done in this field, even if the world’s population were to increase by a factor of four.
Myth: Land values always increase
This reasoning is very common in emerging nations, where the real estate market has experienced an unheard-of boom over the last few years. In these economies, the cost of land has increased ten times in the last twenty years. People in these nations have so grown to assume that real estate constantly increases in value and that land prices always rise as a result. This is not at all the case. One can discover examples of real estate crashes where values have fallen by 40% to 50% if one were to look at industrialised economies like Japan and the United States.
Myth: Purchasing is preferable to renting
Everywhere in the world, buyers of real estate have an emotional bond with the property they choose. Real estate purchases have long been regarded as being “adult” behaviour for people. This choice is based on the misconception that owning property in some way increases one’s financial security but has no financial support.
Myth: It’s simple to flip real estate investments
This myth is not very well-known. However, stories of self-made real estate millionaires who owe their fortunes to nothing but purchasing and selling real estate on borrowed money were prevalent before the US subprime crisis broke out.
Myth: Past Results Predict Future Results
Many aspiring real estate investors have a propensity to extrapolate historical patterns from the housing market to forecast an incredibly bullish future. However, it is important to remember that over the past ten or so years, the globe has undergone a fundamental change. Outsourcing, free trade, and international investments by multinational corporations have all contributed to an unheard-of boom in emerging countries. No such revolution appears to be in store for the future. It is exceedingly unlikely that the performance of the last few years will be reproduced in the next years if no unanticipated economic revolution radically alters the economic paradigm.
The financial factors, however, make it evident that this is not the case. In some circumstances, buying is unquestionably the superior course of action, while in other circumstances, renting is the wisest course of action. Therefore, the best course of action will vary from instance to situation. In a subsequent essay, this rent vs. buy decision will be covered.