Like every other market, real estate has its fair share of myths and misconceptions. Many result from media scaremongering, high-profile scams and self-styled gurus wanting to sell you their own get-rich-quick investing schemes. Unfortunately, some myths gain credibility, turning investors away from genuine investment opportunities. As a premier vacation rental management company on Kauai's gorgeous North Shore, our aim with this article is to educate you about the myths surrounding rental ownership, so you can look into diversifying your portfolio with one of the most (potentially) rock-solid investments available.
Are you thinking about investing in a vacation rental on Kauai?
Of course, investors should be cautious: the last thing you want to do is lose money. Savvy investors take the time to really study and explore the real estate market, law, regulatory framework and investment options so that any misconceptions can be cleared up before they lay their money on the line. Here, we've done some of the heavy lifting for you.
Myth #1: You Must Have Lots of Money, Experience, and Time to Invest In Vacation Rentals
Of course, you do need money to invest. Direct real estate investing — actually buying the bricks and mortar of a building — needs cash down. However, whether it's your first or fiftieth purchase, an excellent real estate agent (like one of ours!) should be able to guide you along the path of finding a favorable loan.
As for the myth that investing in real estate is time intensive, this can definitely be true...if you manage the property yourself. That's why we're here! By hiring a well-oiled management company, you can leave the late night emergency calls to us. While your job requires some initial due diligence and decision-making, investing will by no means become your second career.
Myth #2: The Timing's Wrong for Vacation Rentals
This fallacy endures no matter what the market's doing. Right now, by many indications the market is rebounding. Those who rigidly put off investing because they're worried that prices are peaking and future values have nowhere to go can potentially be short-changing themselves in the long-run. Of course, doing a thorough risk-benefit analysis is up to you and your trusted advisors. At Oceanfront, our purpose is to help you make the best decisions with your money. We're constantly abreast of the latest data; with our finger on the pulse of Kauai real estate, we'll work with you to strike while the iron is hot, or wait until it is.
Real estate values go up and down over time — this is observable fact. Sometimes, values spike and sometimes they crash. No one knows for sure when or how this will happen, though many speculate. History, however, shows that Kauai real estate closing prices have always risen over time.
Myth # 3: The Market’s Too Volatile to Invest in Vacation Rentals
Real estate is a hard asset. Both the structure and the land it stands on have value. Those values, as we have discussed, rise and fall in cycles. Those who play the equity game — investing in real estate for capital appreciation — can be casualties of those cycles. However, in the long-term, the Kauai market is not volatile, because closing prices have always risen, eventually. Even if the market goes through some volatile periods, history shows that property investment on the Garden Island is a wise bet.
Myth #4: Ownership is Too Illiquid
Real estate is considered an illiquid asset. Unlike paper stocks that you can sell in minutes, your real estate asset might linger on the market for months or even years before finding a buyer at a profitable price. However, with a vacation rental under management, there's no question of deferring returns until the re-sale: you receive a stream of income into your pocket as we handle all the details. It's that simple.
Myth #5: The Only Way to Make Real Estate Passive Income is Through A REIT
Real Estate Investment Trusts are a popular way to diversify into real estate. They offer a truly hands-off real estate investing experience — but it comes at a price. On the plus side, REITs provide investors with an income produced from rents without the investor having to worry about the day-to-day management of the asset, which is handled by a management team.
The problem is, when you invest in a REIT you have no control over the assets the trust invests in. Indeed, a proportion of your REIT investments may not be in real estate at all.
Directly investing into real estate lets you choose your investment upfront. Rather than relying on the judgment of a trust administrator (with commensurate fees), you get to vet each investment opportunity and pick the one that's right for you. Then, if you want to be involved in the process of maximizing your return, you have a lot of sway in the way your rental is marketed & managed. Or if you want to take a hands off approach, you can trust that our talented team will make the most of your investment on your behalf.
Ready to speak with one of our talented and award-winning agents? Call our office today: (800) 222-5541. We're a boutique brokerage on Kauai's north shore with a proven track record of excellence.
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