The BIGGEST LIES in Real Estate

What's up you guys, it's Graham here! So let's discuss him, the biggest lies that were told in real estate because there's definitely a lot of misconceptions out there. Especially when everyone has their own opinion with what they feel is best, it ends up just becoming a lot of white noise, and you usually end up just getting more confused than when you first started.

So I'm making this video to be as balanced and truthful as possible because I don't believe there's just one right way to do something. In fact, just like with anything, nothing is ever just black and white. I believe the best way to learn is just to hear everything out and then come to your own conclusion of what you feel is best for you. So this video is exactly that; it's meant to be a totally balanced, neutral perspective of the biggest lies and myths that you're told when it comes to real estate.

The first myth that I hear is that renting a home is a bad idea and it's just better to own. And by the way, I say this as a real estate agent where it's my job to sell houses and that's where I make most of my money. I’m also a real estate investor who, you guessed it, buys houses and I also make videos here on YouTube about buying and investing in real estate. So I think it's pretty safe to say that overall I'm pretty biased towards buying and investing in real estate.

And with all of that said, I'm here to tell you that—wait for it—shocker, buying real estate is not for everyone. There are some situations where buying real estate is actually a bad idea and renting could actually be better. That could be pretty hard to believe from someone who basically made his entire living buying houses and selling people houses.

But here's the thing: when it comes to doing this, there's absolutely no one-size-fits-all approach. These are some of the situations where I'd say renting is just a superior option over buying.

Now, the first way renting could be better is if someone is new to an area and doesn't really know if they're gonna like living there or not. Now in that situation, it's usually a lot better to go and rent and really understand the area until you figure out where you want to be. This is pretty self-explanatory for the most part.

The second situation where renting can be better is if you don't plan to keep your home for more than about four or five years. Because let's be real, real estate lame joke: usually, it is cut those out anyway. The reality is that buying and selling a home can be very expensive.

The thing is, when you buy a house, you are first of all tying up your down payments in that property. You are also responsible for all the property taxes, all the maintenance, and you're also responsible for paying all the closing costs on that property, which typically adds about 1% in addition to the purchase price. And then when you sell the property, you're gonna have to pay another 6% in closing costs. This means that in order to just break even on your sale from owning it, you have to sell it for about 7 to 8 percent higher than what you bought it for—again, just to break even.

So with that said, here's the reality: owning a home for one to five years is not a long enough time span to guarantee you're gonna get a positive return by the time you sell. We've all been really lucky to see a surge of appreciation over the last seven years, but this is not normal, and we've come out of one of the worst recessions we have seen in a very long time. Realistically, your home is not going to be going up in value 10 percent every single year.

And you know what? If it does, then guess what? You would be better off just buying the home! And that's great for me because I would be making a lot more money in real estate too. So this is why I recommend that people buy a home who plan to hold it at least 5 to 7 years. This gives you the best chance to ride out any short-term fluctuations in price, and in the long term, you should end up making some money.

The third reason you could be better off renting is if you have a better use for your money than tying it up in real estate. This is something that's very true for many business owners. They would get a better return investing $50,000 in their own business, let's say in the form of marketing, to make an additional hundred thousand dollars in profit than spend that fifty thousand dollars tying it up buying a home.

Now real estate is a great investment when it comes to long-term wealth preservation and growth, but when it comes to getting an immediate ROI, it usually doesn't compare with the ROI that you can get investing that money in your own business. So for most people who run their own cash-flowing business, they prefer to rent their homes instead and then use as much of that free cash flow as possible just to reinvest back into the business to make even more money.

So as you can see, there's definitely a lot of scenarios where renting a home becomes a lot better than buying. But it really comes down to your own specific situation and also how long you plan to live in the home for. But overall, generally speaking, if you're planning to live somewhere short-term, renting is better, and the longer you plan to live in a home, the more it makes sense just to buy it instead.

Now the next myth that I hear is so common, and I hear this all the time, and it really bugs me, and that is you can't find a good deal buying your house on the MLS. Yes, usually the people who are telling you this are trying to sell you a deal that's not on the MLS.

Now for those that don't know, the MLS just stands for the Multiple Listing Service, and this is just the public database of homes for anyone that goes and searches online. This is where they're all syndicated from; like anytime you go on Redfin, Zillow, Trulia, realtor.com, or any of those websites, they pull all of their data publicly from the MLS. And that's the misconception that you can't find a good deal on the MLS because it's available and advertised for everybody to see.

Instead, the myth is that you get the best deals from the properties that are off-market that nobody knows about. But here's the reality, and I say this as someone who bought one home off the market and five homes on the market and is a real estate agent. I've represented buyers on homes that were not on the market, and I also get pitched wholesale deals all the time from off-market properties.

I will say this: the source of the deal does not matter at all. I have seen incredible deals come up in the MLS that were improperly advertised, and because of that, many people just overlooked them and an investor was able to scoop it up at a very good price. I've also seen dozens of private deals passed around a million different times to different investors and no one wants it because it's overpriced, even though it's an off-market deal.

Many times the reason it's an off-market deal is because the seller doesn't want to publicly advertise it and list it for sale because they know they want too high of a price and it would just end up sitting on the market. So let me say this again just to be perfectly clear: the source of the deal does not matter! An off-market deal does not make it a good deal just because it says short sale or foreclosure does not mean that you're going to be buying it under market value. Just like if something is on the MLS, it doesn't mean that you're automatically buying it at market value.

It's way more important just to find a good deal than to try to find the right source of the deal because trust me when I say this: most wholesalers out there that are pitching these off-market deals have pitched them to dozens of people by the time it ends up to you, and they've usually all passed them up. By the time you get it, it's been passed around more than you can use your imagination.

The next myth when it comes to real estate is something I hear a lot of, and this is certainly a misconception I absolutely want to clear up, and that is that the more units you get, the more profitable they must be.

Let's just make something very, very clear from the very beginning: having more units does not mean you're gonna be making more money. Having more units does not mean that's a better investment than something with fewer units. Now when it comes to identifying a good investment, all that matters are these two things: how much a property makes after expenses and how much you buy it for. That's it.

For example, if you end up investing in a two-unit building for $300,000 that makes you $30,000 a year, that is a better investment than a ten-unit building that you bought for $300,000 that makes $28,000 a year. But if you end up buying that ten-unit building instead for $250,000, well guess what? Now that becomes the better investment. It all just comes down to what your ROI is at the end of the day, and that's it.

I have seen houses that are better investments than ten-unit apartment complexes, and I have seen ten-unit apartment complexes that are better deals than houses. It all just comes down to the price that you pay for it and how much money it makes, and that's it. For me personally, I'd prefer having fewer units that rent for more money than more units that rent for less money.

I found that generally, the higher the price point, the less hassle I have had, the less turnover I've had, and the higher quality of tenant that I've had. So for me, I would rather have two units that rent for $2,500 each than five units that each rent for $1,000.

The next misconception when it comes to real estate, and this I feel like applies to a lot of people right now, is that they feel like they can time the market. And if this is you, I want you to know you're not alone! There are many, many, many people sitting on the sidelines waiting for the perfect opportunity to buy back in when the market bottoms out.

Now here's the truth when it comes to this, and get ready for the truth—the truth is coming out! Can you handle the truth? Okay, well this is the truth: if you can properly time the markets, you will make a lot of money. There's absolutely no doubt about it. When I started buying in 2012, I pretty much quadrupled the value of the home from when I originally bought it. And if I could just replicate that every single market cycle, well holy crap, guys!

But I'm gonna tell you what usually ends up happening. See, the type of person who waits for the market to crash is generally the type of person who won't buy back in when the market actually crashes. And how do I know? Because I have seen this happen non-stop over now nearly the last 11 years with everyone who said they were waiting for the market to crash before buying in.

These were people who were telling me this in 2008 and 2009, and back then guess what? They were actually right; they didn't buy back in and the market really crashed. But then guess what? In 2010 and 2011, when the market really did hit its bottom, those people were saying, "Oh, wait for the market to crash a little bit more because I think we're gonna see even lower prices. We're gonna see another wave of foreclosures coming in, and then I'm going to buy back in!" But then guess what? The market starts creeping up a little bit, and they tell me, "No, the second wave of foreclosures is coming, we're about to hit the worst recession we've ever seen in 2011."

And when nothing happened, just wait for it. And then when the market continues going up, they say, "Oh no, no, no! It's too expensive; it's not a good time to buy. The market is too expensive." And then it goes even higher than that, and they say, "No, no, the market's at its peak! I'm gonna wait for it to crash again, and when it crashes, then I'm gonna buy back in." They never buy!

And I'll tell you this: long-term, I'm a firm believer that these real estate market cycles don't really matter long-term. You don't buy a property based off what you think it's going to be worth five years from now. If you're correct on that, then hey, you know what? Sure, you made a little extra money, and you were right. But that's not what real estate is about! You buy based off the cash flow and how much equity you can make in the property when buying it, based off the facts of today.

Today, like if you buy a property for 20% below its market value and then you fix it up, and now it's worth 15% more than what you bought it for, then it doesn't matter if you bought it at the peak. If that property cash flows, and you bought it under market value, and there's still equity in there, it doesn't matter at its peak. If it's paying you money every month and it doesn't matter because you're not planning on selling it!

You bought it for the cash flow; you didn't buy it based off what it could be worth a few years from now. It's more important that you wait and find the right deal today than it is to wait potentially years or potentially wait a decade to buy real estate, waiting for the market to dip.

And the last myth that we're told is that it's a full-time job investing, managing, and buying rental properties. This one I gotta say is probably a little bit of a yes and a little bit of a no. But it comes to me personally; I spend a lot of time trying to find the best deal, and I'm a real estate agent, so it's pretty much my full-time job to go look at these properties.

So I spend a lot of time when it comes to myself finding the right place and really making sure I make the best move possible. I really believe that it's because I spend so much time doing this that really gives me the upper edge over everyone else looking at the same thing. I know exactly what to look for and I can see the trends of where the market is heading and where a specific property is really undervalued.

But for many other successful real estate investors, they know they're not doing this full-time, and they were doing this in addition to having, let's say, a normal 9 to 5 job. Instead, they look at properties on the weekends. They might manage their rental property a little bit after work, and they might use some of their downtime figuring out the logistics of investing and managing.

It's more important that you really understand how to evaluate the numbers of a property and identify a good deal just off a piece of paper. Just doing this one thing can weed out like 95% of the properties that are just complete money-time wasters. This just frees up your time to focus on the remaining 5% that could actually be a good candidate to buy.

If you can find a competent real estate agent who could do a lot of this for you, it's gonna take a lot of the work off your shoulders, and you can really rely on them to find you the best deal from there. If you're actually gonna be renovating a property, it becomes a little bit more complicated with the logistics of making sure everything is on track, on budget, and on schedule.

But if you have a good contractor or someone to manage the job, again, they can take a lot of this work off your shoulders. The same thing with actually renting out and managing your property: you can factor this into your returns and just hire a property manager to handle all of these things for you.

Or like for me personally, I will spend a weekend and rent out the property. I've never had a problem renting out one of my properties within a week, usually just over a really busy weekend. So when it comes to investing in real estate, you could really just be as hands-on or as hands-off as you'd like.

You can work as hard as you want, or you can outsource as much as you can as possible! As long as you have strong enough rental income, you can afford to do that.

So with that said, you guys, thank you so much for watching! If you're interested in learning more, I do have a program in the description called the Real Estate Investing Blueprint that covers everything I know about buying and investing in real estate—how to find the best deal, exactly what to look for, how to negotiate the deal; everything basically is in that blueprint! That's why it's called a blueprint.

So go ahead and check that out! I'm running a huge discount on this for a little while longer, and there are a few free previews in there as well so you can just kind of check some of it out. But anyway, the link to that is in the description. Thank you guys again for watching!

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Thank you again for watching, and until next time!