3 types of people who should never invest in real estate (2024)

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  • Investing in real estate is quite different from investing in the stock market, and for some people, it's just not the right move.
  • The real estate investors we spoke to say that anyone looking for a shorter-term investment should look elsewhere — real estate can involve longer transaction times and a longer time to break even.
  • For those who want to become landlords, it's important to take the time to learn about local renters laws, how to choose the right building, and more.
  • Investing in real estate also isn't as passive an investment as you may think — in most cases, it requires significant time and effort on your part.

3 types of people who should never invest in real estate (1)

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3 types of people who should never invest in real estate (3)


Real estate investing can be a great way to add to your income, but it comes with costs. Not only does it take a lot of cash to get started in most circ*mstances, it can also be time-consuming. Oftentimes, it's not as flexible as investing in the stock market, where buying and selling can happen easily and there's little daily management required.

Ultimately, it takes a lot of time to manage and maintain a rental property correctly, from learning how to to find and keep good tenants to upkeeping your property for years and years. We spoke to landlords and real estate investors who each own several properties, and they identified several types of people who just aren't the right fit for this type of investing.

1. Anyone who doesn't want a long-term commitment

Real estate is a long-term commitment.


"If you buy stocks and you don't like the stock in two minutes, you can click two buttons and you're done. But with real estate, it doesn't work that way," says real estate investor and landlord Ogechi Igbokwe.

With real estate, it's not as easy to turn around and sell a home. Not only can there be larger tax implications, like capital gains taxes for investors, but it's also a longer process for a buyer who likely needs financing, inspections, and time, too. It can take years for the home's value to appreciate enough to make up for the fees. And that's not to mention the time it takes to find a buyer to start with.

Real estate isn't always a quick investment — not only does it take time to increase in value, but it also takes time to actually sell the home.

2. Anyone who's not willing to put in the time to learn

Because real estate investing is such a commitment, it takes some time to learn the ropes. "It's not something you just dabble into; you actually need to learn," Igbokwe says. "You either need a mentor or you can take a course." In her experience, there's value in learning "from someone who's experienced, who owns properties, who has been in the game for a few years."


And there's also a big value in taking the time to study all the laws, regulations, and requirements around becoming a landlord. "You have to be educated and you have to understand the legalities involved," says investor and landlord Becky Nova. For landlords, there are all sorts of local laws that can regulate everything from how you interact with renters to how much you're allowed to raise the rent. And it's your job to know these things in advance.

It takes time to learn these things, and it's something anyone who wants to invest in real estate should think about before buying.

3. Anyone who only wants passive income

"I think one of the biggest misnomers about real estate investing is that it's passive investing," Nova says.

In her experience, it's anything but a passive investment. It involves a lot of management, and the right skills. Working with current tenants, screening new tenants before they move in, and even buying the buildings themselves all take time — and there's nothing passive about that.


Unlike dividends, which are obtained through stock market investing, real estate investing will require effort on your part. "You should have the extra time to manage the property and stay on top of that. Sometimes, it can be like another full-time job," financial planner Riley Poppy of Ignite Financial Planning in Seattle previously told Business Insider.

"People think that they're just going to get mailbox money, and real estate is not that," Nova says.

Liz Knueven

Personal Finance Reporter

Liz was a personal finance reporter at Insider. Before joining Insider, she wrote about financial and automotive topics as a freelancer for brands like LendingTree and Credit Karma. She earned her bachelor's degree in writing from The Savannah College of Art and Design. She lives and works in Cincinnati, Ohio. Find her on Twitter at @lizknueven.

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3 types of people who should never invest in real estate (2024)


Who should not invest in real estate? ›

  • Anyone who doesn't want a long-term commitment. Real estate is a long-term commitment. ...
  • Anyone who's not willing to put in the time to learn. Because real estate investing is such a commitment, it takes some time to learn the ropes. ...
  • Anyone who only wants passive income.
Dec 11, 2020

What are the three most important factors in real estate investments? ›

Home prices and home sales (overall and in your desired market) New construction. Property inventory. Mortgage rates.

Why do most people fail in real estate investing? ›

Many investors have failed because they did not have the necessary knowledge or experience to navigate the complexities of the property market. Even experienced investors can fail if they do not understand the risks involved or underestimate their abilities.

Why is real estate not a good investment? ›

Real estate investing can be lucrative but it's important to understand the risks. Key risks include bad locations, negative cash flows, high vacancies, and problematic tenants.

Can poor people invest in real estate? ›

With the correct approach and a reliable network, investing in real estate with no money down is entirely feasible. Let's explore how you can start this journey with the right partners and knowledge at your disposal.

Can everyone invest in real estate? ›

Although it requires considerable time, patience, and (of course) cash, almost anyone can invest in real estate.

What are the 3 major types of investment styles? ›

The major investment styles can be broken down into three dimensions: active vs. passive management, growth vs. value investing, and small cap vs. large cap companies.

What are the 3 A's of investing? ›

Remember the 3 A's for retirement saving: amount, account, and asset mix.

What are the 3 characteristics of real estate? ›

Understanding Real Estate

The physical characteristics of land include its immobility, indestructibility, and uniqueness, where each parcel of land differs geographically. Real estate encompasses the land, plus any permanent man-made additions, such as houses and other buildings.

Why do 87% of real estate agents fail? ›

Without a business plan in place, you won't have a path that can lead you in the direction you're trying to go. 87% of real estate agents fail because they're missing a business plan that outlines the steps they need to take in order to reach their goals.

Why 90% of millionaires invest in real estate? ›

Overall, real estate investing offers a combination of appreciation, cash flow, and leverage that can lead to significant wealth accumulation over time. It's no wonder that so many millionaires have used real estate as their primary wealth-building strategy.

What is the biggest threat to real estate? ›

Economic uncertainty and market volatility are two of the most significant risks that real estate investors face. The current global economic climate has created an unpredictable future for people who are buying or selling homes.

When not to invest in real estate? ›

Market conditions play a vital role in the success of real estate investments. If the local real estate market is experiencing instability, such as declining property values, high foreclosure rates, or oversupply, it may not be an ideal time to invest.

Is it ever a bad idea to buy a house? ›

If your credit score is strong, your employment is stable and you have enough savings to cover a down payment and closing costs, buying now might still be smart. If your personal finances are not ideal at the moment, or if home values in your area are on the decline, it might be better to wait.

What is one major problem with investing in real estate? ›

Market volatility: While real estate is generally less volatile than the stock market, it is affected by market fluctuations. Economic downturns can lead to decreased property values and increased vacancies, which can impact your rental income and overall return on investment.

What is a major disadvantage of real estate as an investment? ›

Markets can be fickle; you have no guarantees. Most people have to be landlords as well as investors. Securing financing can be tough for pure investments.

Can be a disadvantage when investing in real estate? ›

Real estate investments tend to have high transactional costs, especially in legal and brokerage fees. The process of acquiring a new property is also very long and tedious with lots of legal formalities. Another disadvantage of property investments is that they are not easy to liquidate.

What is not considered a benefit of investing in real estate? ›

The Answer is Realizing a quick profit. (Option-c). Investing in real estate can offer multiple benefits, but realizing a quick profit is not one of them.

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