Seven Signs you’re buying a Bad Real Estate Deal
In today’s depressed market, finding real estate deals has become challenging for investors. To stay active in the market and make profits, some investors have to go an extra mile. It is good to understand that not all real estate deals are created equal. While there are certain situations where real estate investments can bring quick profits for you as an investor, the reality is that not all deals are good. Investors of all stripes should be alert for red flags before closing real estate investment deals. Making smart choices with your money requires you to be able to differentiate good real estate deals from bad ones.
Here are red flags that prelude bad real estate investments.
It Doesn’t Match Your Desired Numbers
One thing to always keep in mind when investing is that numbers don’t lie. While it is good to be flexible when looking for a real estate investment, never should you neglect the investment principles. When you notice that numbers don’t add up, it could be because of data misrepresentation, bad math or one of the parties could be hiding some data. Use actual documents and tangible metrics to determine if the deal is good. If the net income, cash flow, and ROI don’t add and the parties are not ready to explain, walk away and look for a more transparent real estate deal.
The Property Has Been On the Market for a While
How long has the property been on the market? When assessing an investment property, this is an important question to ask. If a property has been for sale for months and months or years, there’s likely to be a problem with it. There is no way a good deal can be available for a couple of weeks. Though it could be a deal, ensure you know why it has stayed on the market for too long and do some thorough due diligence as well as hard negotiation for the property.
The Property Seems Too Cheap
While it is possible to find cheap deals that are solid, this is not always the case. It could be cheaper because the seller is motivated or the market trend. However, in the real estate market prices often reflect value. It is important to find out why the property is far cheaper. Maybe it needs major structural repairs or it has zoning issues or large tax bills that the sellers want for you to take.
There Are Real Estate Title Issues
Don’t put your money at risk by investing in a property with title issues. If you notice anything odd about who is selling a property and the owner who listed it in public records, it can be a sign that the property has title issues. Moreover, look for quit claim deed that could have been recorded. Don’t jeopardize your real estate investment.
Seller Refuses Your Request for Real Estate Inspection
An honest seller will not have any problem with a property inspection process. However, if a property seller prohibits you from having the property inspected or bringing an appraiser to evaluate the property, walk away. No seller should prohibit you from conducting your due diligence if the property they want to sell is a good deal.
The Property Is Poorly Located.
In real estate investment, location is everything. When choosing a real estate investment, determine the suitability of a location in line with your investment strategy. Establish the future quality of a location before investing in a property in that location.
The Property Has High Vacancy Rates
Don’t ignore to check why the property building has high vacancy rates. High vacancy rates, especially in residential properties, could mean the property has bigger issues. It could be because of the inefficiency of the management, maintenance problems or neighborhood issues. However, don’t move on with the contract until you find out the real problem you’re facing. Talk to tenants on the property and neighbors to help identify the issue.