is investing in real estate worth it?

There are many reasons to invest in real estate. Whether you're looking for an investment that offers a strong potential return, or you want to add some diversification to your portfolio, taking advantage of real estate investing opportunities can benefit almost anyone.

It's also easy to find misconceptions about what it takes to successfully invest in the housing market. While it's true that some people have made a fortune in real estate, there are many common myths about the market that tend to scare would-be investors away.

One of the most common misconceptions is that real estate investing always requires a large, up-front investment. While many times it does require a hefty down payment, this isn't always the case. For example, individuals looking for their first apartment might be able to find one without securing outside financing by taking advantage of an owner move-in (OMI) or a tenancy-in-common (TIC).

There are other ways to invest in real estate without putting up all of your own money, too. For example, many times you can purchase an investment property by putting together a group of investors and taking out a mortgage that covers the total price. This is called buying with seller financing; it's also possible to do the same thing using a bank, although this option typically has more limitations.

There are plenty of other myths about real estate investing that keep people from getting started with this type of investment. The good news is that by understanding these misconceptions and how they impact your wealth building goals, you can overcome them and start building wealth with real estate.

Here are four of the most common misconceptions about investing in real estate, and why they are not based on fact:

Myth #1 : The key to success is buying property at below-market value.

While it's true that buying at a discount can provide you with some short-term financial benefits, the market will eventually equate value to whatever price buyers are willing to pay for property. There is no guarantee that you'll be able to sell your real estate investment anytime soon, even if you paid too little.  

Myth #2 : You need a lot of money to get started.

While a large investment is preferable for making a dent in the real estate market, you can begin to make an investment with as little as $1,000. That's enough to get you into an REIT or other small-scale offering that manages properties all around the country. You can also get started by purchasing a single property at the right price.

Myth #3 : Real estate investment is not worth it because you have to deal with tenants.

While a real estate investor does have to manage tenants, this isn't a huge hurdle. In reality, being an absentee owner of rental property has its downsides too, since you have to trust that your property manager is handling ongoing issues with the building.

Myth #4 : There are no tax benefits to owning rental property.

This isn't true, either. As long as you understand the rules for depreciating assets correctly, you can get a sizable deduction on your taxes by renting out real estate properties.

DISCLAIMER: This article is not designed to be a how-to guide, but rather for education and/or entertainment purposes; it doesn't provide tax advice or recommendations. Before investing in any financial product or service you should speak with a licensed professional to consider if such an investment is right for you. (reference disclaimer)

There are many reasons to invest in real estate. Whether you're looking for an investment that offers a strong potential return, or you want to add some diversification to your portfolio, taking advantage of real estate investing opportunities can benefit almost anyone. It's also easy to find misconceptions about what it takes to successfully invest in the housing market. While it's true that some people have made a fortune in real estate, there are many common myths about the market that tend to scare would-be investors away.

To learn more about building wealth through real estate, contact Matthew J. Holt, wealth manager for Christian investors.