Some people have false notions about the real estate industry in Canada. They think that money is irrelevant in real estate investments, that rental income is necessary for a successful business, and that there’s a high risk of liquidation when buying or selling a home. But there’s much more to buying and selling a home than that. You’ll need to negotiate with your seller and schedule house inspections. And you’ll need to coordinate contractors.
Preconceived notions about the real estate industry
The real estate industry is filled with misconceptions. The truth is, making it as a real estate agent is far from easy. However, as a new agent will tell you, making it is not for the weak heart. Real estate is not for those who are afraid of failure or limitations. On the other hand, those who want to make money and be their boss should consider this career option. Here are some of the misconceptions about the industry.
Irrelevance of money in real estate investment
The irrelevance proposition theorem states that a firm’s valuation remains constant even if the capital structure changes. A firm’s valuation would also be the same regardless of the interest rate and tax rate. However, the proposition does not describe the financing operations of a firm. Various factors determine the value of a firm. The irrelevance proposition theorem is not a complete guide on how to finance a real estate investment.
The necessity of rental income in the real estate business
There are many reasons to want rental income in your real estate business, but the main reason is to maximize your profits. Many investors choose to hire a real estate team to manage their rental properties, eliminating the need for the investor to manage the properties. A well-rounded team is much more likely to succeed, which can provide a more passive income stream. However, there are some tips to consider when hiring a team: Make sure that their skills complement yours.
Liquidation risk in real estate
A major concern when investing in real estate is losing money during a liquidation. The market determines a property’s value, which fluctuates in value over time. Appraisers value property according to the current market price. However, the risks associated with the liquidation are often higher than the asset’s price. Investors should consider the liquidation risk premium when choosing a real estate investment.