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8 Signs That a Residential Property is a Bad Investment

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When you are investing in residential properties, it’s key to look for clues that ensure that your investment will be lucrative one in which you are only able to recoup your money but are also able to make a profit. While it can be hard to just walk into a residential property and determine if a deal is a “good deal” or not, looking deeper into the state of the property can help you determine if the property is one that you want to invest in. Otherwise, you might realize that some properties will be more of a headache and cost more to fix the problems than the property is worth or what you will be able to get back in rent when you put it on the market for a tenant.

The following are 8 signs that a residential property is probably not worth your time and that you should move on to seek other, smarter residential investments:

  • Price of the Property: The property should be similarly priced to those in the surrounding neighborhoods. The price is way above or way below the “standard” going rate in that neighborhood that’s a sign that you might look for another property to invest.
  • Age of the Property: The older the property, the more likely the property is to have problems. If you are considering older properties, ask which kinds of upgrades and remodels have been done to the home. The longer it’s been since things like the roof has been replaced, the more issues that the property is likely to have and the more you might spend fixing these issues before it can be rented out!
  • Consider Maintenance Issues: If the property has any glaring maintenance issues that you know will be a problem in the next few years, it will be more money out of your pocket to fix these issues. Consider that when making an offer on purchasing the property. For example, if the home will need a new roof, that’s $10,000 to $20,000 out of your pocket. Exterior painting, new appliances, bathroom remodels, new flooring, etc. will all add to the price that it will cost you to maintain the property.
  • Study the Property’s Equity History: If you are going to buy and hold the property for an extended period the property should be able to gain and retain value so that when you sell it, you make a profit and don’t’ lose money on your investment.
  • Listing Information is Incomplete: Seeing incomplete listings or sellers who are unwilling to provide complete listing information, that’s a huge red flag that the seller wants to hide something. Hiding information from prospective buyers means that those buyers might be paying the price if they consider investing in that property. Hidden costs can eat away at your profit and make the property an expense rather than a way to help you invest in residential real estate to help you earn a living.
  • Location, Location, Location: The location of a property is key to what kind of value the home will gain and retain. Renting you have to consider the amenities that the renters will want in the area. You need to find safe neighborhoods where people feel like their families are safe while they are living there. Consider a school district with quality academics and schools where parents know their children can excel. All of this is something to consider when purchasing an investment property that you will rent to a tenant.
  • Length of Time on the Market: If the home has been on the market for months or longer, there is probably a reason for that. Do your homework and investigate why the property was not sold sooner. Others have steered away from it for a reason; maybe you need to also!
  • Issues with the Property: A property can be available at a great discount, however, if the home has too many issues the headaches may not be worth the investment. Structural and foundational issues can be too much of a hassle to make it worthwhile. Intentionally or not, many homes like these wind up turning into money pits that cost you more than they are worth as an investor!

These are eight key red flags to look for when you are investing in a property. If you are noticing these issues with a property and choose to do so anyway, then you might be putting out more money than you will be able to get back. Investing wisely is key when you are ensuring that you are you will make a profit back on the properties you invest in.

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