Main myths about real estate investments

The real estate market has long been associated with reliability, stability, and the prospect of passive income. Advertising brochures and stories of successful investors shape the image of an ideal investment. However, in reality, many misconceptions hinder making an informed decision. These myths about real estate investments lead to incorrect assessment of income and expenses, blind faith in eternal price growth, and ignoring risks. A professional approach begins with dispelling illusions and moving on to the dry logic of numbers, documents, and the market.

Myth #1: Real estate always appreciates in value

Debunking the myth of real estate investments: the market is cyclical. Even in countries with stable economies, such as Germany or Canada, declines of 8 to 30% over a decade are recorded. In Russia, in 2015, apartments in rubles became more expensive, but in dollars, they halved in value. In the Moscow new construction market in 2023, stagnation was recorded: the price per square meter increased by less than 2%, with inflation at 11%.

Real reasons for deviations:

1. Market saturation.
2. Increase in housing supply.
3. Rise in the key rate of the Central Bank of Russia (in 2024 — up to 16%).
4. Tightening of mortgage conditions.

Myths about real estate investments often rely on the idea of endless growth. In reality, profitability without considering depreciation and inflation often does not exceed 3–5% per annum.

Myth #2: Rental income provides stable passive income

Renting out property is not always passive. Managing an apartment requires time, legal knowledge, and oversight. Vacancies, property damage, repair costs, non-payment — are common occurrences even in “liquid” locations.

Calculation example (Moscow, 2025):

1. Apartment cost 12.5 million ₽ (one-bedroom in a comfort-class residential complex).
2. Rental income 45,000 ₽/month or 540,000 ₽/year.
3. Expenses: taxes — 78,000 ₽, vacancy — 2 months (-90,000 ₽), repairs — 50,000 ₽, maintenance — 18,000 ₽.

Net income: 540,000 – 78,000 – 90,000 – 50,000 – 18,000 = 304,000 ₽ → yield ≈ 2.43% per annum. Conclusion: myths about real estate investments ignore real operational expenses, which consume a significant portion of the profit.

Myth #3: Investing in studios is always more profitable

Small size does not mean high profitability. Studios generate more income per square meter, but have lower liquidity, higher wear and tear, and more risks of vacancies.

Indicators for 2025 (Saint Petersburg):

1. Studio: 27 m², price — 5.3 million ₽, rent — 30,000 ₽.
2. One-bedroom apartment: 43 m², price — 7.9 million ₽, rent — 48,000 ₽.

Comparison:

1. Studio: yield — 6.7% (gross), but longer vacancies (on average 3 months).
2. One-bedroom apartment: yield — 6.1%, but higher demand for long-term rentals and families.

Risk factor: studios often fall into the economy segment with less financial stability of tenants.

Myth #4: Real estate investments are risk-free

Myths about real estate investments conceal many risks — legal, market, and infrastructural.

Real loss zones:

1. Developer goes bankrupt (example: Urban Group, 2018 — 14,000 equity holders affected).
2. Property not completed — need for lawsuits, compensations, shared equity construction fund.
3. Area loses attractiveness — changes in transport routes, emergence of industrial zones.
4. Property tax increase (in 2023 — 23% increase in cadastral value).

Conclusion: investments require legal expertise, technical assessment, and analysis of the district’s prospects. Relying on blind “intuition” leads to losses.

Myth #5: Yields of 8–10% are standard

In reality, such yields are only provided by rare deals with discounts, buying at the excavation stage, or participating in renovation. Average rental yield in million-plus cities is 2.5–5.2% per year.

Real cases:

1. Kazan: new construction, yield — 4.1%.
2. Krasnodar: secondary market — 2.7%.
3. Sochi (elite segment): vacancies up to 6 months → actual yield 1.9%.

Comparison: Federal Loan Bonds 26242 with a yield of 12.3% (as of June 2025) are often more profitable in terms of “risk/return” ratio.

Myth #6: Mortgage accelerates investment profitability

In conditions of high interest rates (in 2025 — 16–17%), a mortgage consumes all profitability. Even when rented out, the mortgage payment exceeds the rent.

Example:

1. Apartment: 9 million ₽.
2. Down payment: 2.7 million ₽.
3. Mortgage payment (17% for 20 years): ≈ 123,000 ₽/month.
4. Rental income: 55,000 ₽/month.

Monthly loss: ≈ -68,000 ₽ + insurance and taxes. Repayment comes from personal funds, not rental income. Conclusion: myths about real estate investments often rely on outdated rates from 2019–2020, ignoring the real cost of money.

Myth #7: You can do everything yourself

Debunking: self-management requires skills of a lawyer, real estate agent, accountant, and contractor. Mistakes in contracts, oversights in tenant evaluation, or incorrectly filed personal income tax declarations are a direct path to losses and fines.

List of key tasks in self-management:

1. Legal verification of the property.
2. Preparation of a lease agreement with force majeure clause.
3. Tax reports — annual declaration.
4. Control of payments and property maintenance.
5. Conflict resolution — before going to court.

Saving on an agent often leads to fines, long vacancies, and reduced income.

Myths about real estate investments: logic against illusions

A professional investor does not rely on intuition or rumors. The real market requires calculations, liquidity assessment, risk consideration, and understanding of financial scenarios. Myths about real estate investments conceal systemic errors: underestimation of costs, ignoring depreciation, belief in eternal growth. Profitability is only achieved with a sober approach, discipline, and technical analysis. Only then does real estate truly become a source of income, not a source of problems.