On an extended family Zoom call the other day, my cousin told me he was thinking about getting into real estate investing. He saw the market staying steady during the pandemic, and wasn’t sure about the future of his job. To him, the case for jumping in seemed pretty airtight. But knowing that I’ve been doing this for decades—and that I mentor and teach people starting out—he asked me if there were any potential downsides.
I told him we should talk in private. Weighing real estate investing pros and cons could take over the rest of the conversation.
But I was glad he asked. Knowing that investing in this economy has potential, and wanting to do something different, can be very enticing. Before jumping in, though, you should understand the pros and the potential cons. After all, this is a life-changing decision. Weighing the risks, measuring the benefits, and seeing how both fit into your life, should be the first step in making real estate investing your career.
5 Pros of Real Estate Investing
There are a lot of great reasons to get into real estate investing. Here are some of the ones that I find most important, both professionally and personally.
Lots of Options for Investors
Some people like to dive in head-first, but the great thing about real estate investing is that you can dip your toe in the water first. You don’t have to quit your job and start investing. There are people who do this full-time, and people who do this as a side gig to augment their income. You’d also be surprised by how many people invest as a source of retirement income.
Not only that, but there are a lot of different ways to invest. You can work any of these strategies:
- Fix-and-flip: buy, renovate, sell quickly
- Rentals: rent out properties for a source of passive income
- Wholesaling: buy and sell immediately, with no rehab, usually to another fix-and-flipper
All of these have different potential ROIs, challenges, and opportunities.
Potential for a Steady Cash Flow
There are a few ways that you can earn your keep by real estate investing. Selling a house comes with an ROI, hopefully—if your sale price is more than the total costs. Wholesaling has smaller margins, but if you work fast and have a network of buyers, you can continually make money on turning houses around quickly.
And then there is the rental option. This source of passive income theoretically brings in consistent income, month after month. It might not be a ton, depending on how many properties you own, but if the rent is more than the cost of owning and upkeep, that’s green in your pocket. These days, that’s not a bad thing at all.
Fund Your Retirement
One thing I hear people say all the time is that they are investing in order to plan a better retirement. They have jobs most of the time, and some 401(k), but we all know how unreliable that can be. People look to real estate to help provide a little more stability in their life.
That comes both before and after retirement. After retiring, there are a lot of entrepreneurial people with a lot more time and, maybe, some flexible income. Real estate investing can be exciting and a new chapter in life. It can also provide some more income, helping make retirement dreams come true.
Being Your Own Boss
To me, the most emotionally satisfying part of investing in real estate is that when I get up in the morning, the day is mine. Anything that happens is because of my initiative. I get to take charge of my own success.
Is that intimidating? Sure, it can be. But I don’t have anyone telling me what to do. I don’t have to satisfy three layers of middle management. And I don’t have to turn in time cards. I can weigh the pros and cons of any decision with the only consideration being how it will turn out for me and my family. I get to be my own boss.
I can’t tell you how liberating that is.
Revitalizing the Community
Whenever I buy a house, it’s not just a transaction. Most of the people I am buying from need to sell fast to avoid foreclosure, stop losing money, or just start a new chapter in their life. They may have gotten a divorce or lost a job. They may have inherited a house they don’t want and can’t afford. They need help.
I get to do that. I get to make a fair offer, with empathy and understanding. They get the cash they need and the ability to move forward.
Not only that, but I repair the house, do the work that the homeowner couldn’t afford. That makes me really happy. It brightens the neighborhood and makes other lives better. To me, real estate investing is socially responsible. It’s work that does good.
Two Potential Cons of Real Estate Investing
Of course, if it was easy, everyone would be doing it. Here are a few potential sticking points.
Any Investment is a Risk
In an ideal world, you find a home that is run-down, buy it on the cheap, fix it up, and then: boom! The neighborhood is suddenly on every list of “Most Desirable For Young Tech Millionaires.” You make a huge return!
That’s pretty much never the case outside of TV shows. The reality is that margins can be pretty tight. And, of course, there is always the chance that you can’t sell the house. You pay taxes, utilities, contractors. The market never spikes. You hold on to it and take a loss when you sell.
Any investment is a risk. You have to be smart, work hard, and not be unlucky. Don’t go in thinking that this is a sure thing. Lots of people lose money.
Buying a house is expensive, even if you are buying a distressed property. And when you are moving fast, you don’t have a ton of time to get loans. You need liquidity. You need cash.
That’s not always easy, especially when you have a lot of projects and your credit line is pretty stretched. Banks don’t always lend to you, and they don’t lend quickly. You have to find other ways to get cash—namely, hard money loans.
Loans have to be paid back. Depending on your credit and your history, the rates might be steep. This is part of the job, and it must be considered when planning your projects.
How to Minimize Cons and Maximize the Pros of Real Estate Investing
The key to any investment is to lower the risks. How do you do that? You get training. You get tools and technologies that help you get money and evaluate deals. And the best way to get all that is to become an independently owned and operated HomeVestors® franchisee.
As a HomeVestors® franchisee, I can take advantage of proprietary tools that help me evaluate projects and plug me into hard money lenders. That’s great for people with and without experience. But for people without, HomeVestors® also gives you training and expert mentorship. It helps take the guesswork out.
There are a lot of potential pros in real estate investing. There are a couple of cons too. But joining a network that helps you out tilts the scale the good way. If you want to understand the potential in this field, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.