Many things can go wrong for investors. And, sadly, how they are handled may either make or break the investors' future. It doesn’t matter whether you are a new investor or a well-seasoned investor – you must always face potential investments with your eyes wide open. If you don’t? Well, let’s just say that you may miss a red flag – a warning - flying right in front of you.
Below you will find 5 red flags you could come face to face with – will you recognize them?
1. Not being able to see the inside of a property before you buy it. If you are buying the property at auction, there is a good chance you won’t be able to see inside. That’s normal. But, if the seller is giving you the runaround about getting inside for one reason or another, this should be a red flag. He or she is likely hiding something.
2. Liens on a property. A lien is placed on a property when someone is owed money. There are many types of liens, such as tax liens, mortgage liens, IRS liens, judgment liens, child support liens, and mechanical liens just to name a few. Some may be small and minor while other liens can claim a large cumbersome amount. Either way, for the sale to happen, these liens are going to have to be paid. And, well, if they aren’t paid, the lienholder can actually move forward with legal action to sell the property.
3. Bad floor plans. You may be worried about liens, encroachments, inspections, and so forth when it comes to the investment. But, you may also want to consider how you are going to rent it out. Let’s say you are buying a property that is listed as a 2/1. It’s small and simple and could be perfect for a small family. Now, what if that 2nd bedroom is not much bigger than a closet. Can you really market it as a 2 bedroom? Could you really get comparable rent for your 2/1 vs. others in the area? Your renter may not think so – turning this into a red flag.
4. The seller asks you to waive your right to inspect the property. If you have seen a property listed for sale as is or with the statement, will make no repairs then you have a pretty good idea that the property probably needs some work done. So, it is to be expected – especially if you are getting a good deal on it. But, here’s the thing – when you have your inspector take a look at the property, you will get a better understanding of the depth of work required. This is important as a bad inspection could mean a bad investment and could kill the deal. If a seller wants you to waive your right to this inspection – don’t do it.
5. Bad neighborhood and/or poorly rated school district. You can have the most beautiful home, but if it is located in a bad area or a poorly rated school district, you are probably going to have a difficult time re-selling the property or even renting it out.
Remember, these are just a few of the red flags. Sometimes investments are as good as they may seem. Unfortunately, sometimes we are blinded by what is because we are wanting it to be something else. Keep your eyes and ears open – and always be on guard when you are investing in real estate.
Marina Shlomov, a managing partner at ALH|Podland Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out atwww.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on Facebook, Google+, Blogger. and YouTube, Bigger Pockets and REI CLub and LinkedIn.