Real Estate Investing – What’s the Real Story?

Every time I hear someone talk about real estate, I get either one of two stories.  The first story is that “real estate is a great way to invest!  You can use other people’s money to make yourself rich through leverage!  Let your renters pay off the mortgage and make you tons of equity!  Real estate holds its value!  Get rich today!  You don’t need anything down!  Real estate is a money machine!”  And so on.  By the time I’m done listening to that pack of lies and hyperbole, my heart’s racing.

The second story I hear about real estate is that “nobody gets rich in real estate.  After the down payment and the mortgage and the expenses, you can’t make any money.  You better hope that the tenant doesn’t destroy the property.  The repairs are awful.  Also, if you buy in the wrong neighborhood then your house will lose value.  The best investment is the one you never make, so don’t invest in real estate.”  After hearing from this guy, I need a Prozac.  Egads.

So, when I ask folks about real estate, why is it I only hear from these two guys?

Image on left unattributed - please email me if anyone knows who I should attribute this image to!, Image on right a still from "Indiana Jones and the Temple of Doom"  from 1984 starring Harrison Ford, directed by Steven Spielberg, and produced by George Lucas

The guy on the left says I'll always make money for sure. The guy on the right says I'll lose my shirt. Frankly, I don't trust their judgement.

So, there’s got to be some sort of happy medium to real estate investing.  Let me know your experiences and advice in the comments.

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