Investor Myths

Myth: There is a real estate bubble when a community experiences a certain amount of continuous price appreciation.

Truth: A real estate bubble occurs when market forces in a community create it. Such factors include lack of business development, decline in demand, fraud that leads to inflated demand or appreciation, employment decline, a weak rental market, buyer and product homogeneity, etc. Consult with me for research regarding all of these factors to help you understand local market trends and investment opportunities.

 

Myth: If you can’t cover your income property’s monthly expenses with your expected rental income, you should not buy the income property.

Truth: Most people invest in stocks and mutual funds with no expectation of a monthly dividend, yet these investments can be sound. Monthly rental income can offset the cost of investing, but more important factors determine the quality of an income property investment. These include tax benefits such as depreciation and interest write-offs, scarcity of property type and layout, tenant availability, city development plans, management quality and cost to maintain. If these important factors are ideal, the cost to carry the property is just part of your investment in a product with the potential for significant appreciation and tax savings.

 

Myth: Increasing the square footage of a property will increase its value.

Truth: If you increase the size and don’t take into account layout, flow, light and neighborhood issues, dollars spent remodeling may not bring the return you expected and may also decrease your property’s value.

 

Myth: Interior upgrades will improve the value of a rental property.

Truth: Many landlords over renovate rental properties in neighborhoods that can’t support the expected increase in value. Upgrades on a rental property should be to create clean, open and versatile living spaces that are easily maintained. Often, less is more.

 

Myth: Market conditions should determine when and if you should rent, buy, invest or sell.

Truth: Your unique financial situation and goals will determine if you should rent, buy, invest or sell. If you own property, the design of the specific property, its level of scarcity and the existence of current and future competitive properties are also major factors.

 

Myth: Income properties change in value for the same reasons residential properties do.

Truth: The demand for income property is related to rental prices and other investment opportunities in the area. Income property trends don’t necessarily mirror residential.

 

Myth: Builders understand how to change a home to maximize value.

Truth: Many builders do what you tell them to do and even follow their own personal preferences. They often do not know what will excite buyers at the moment you want to sell. Consult with me to find out if and why people are spending more on specific features and layouts in a home.

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