Signing on the dotted line can be the first step toward generating life-changing gains from a real estate investment. It can just as well turn out in hindsight, though, to have been a grave, avoidable mistake.
Experienced investors learn to spot real estate deals that are not exactly what they seem so they can turn their attention to other opportunities. Being familiar with the six most common signs of real estate investments that are best avoided will help anyone succeed.
1. A Dicey Location
Even people who have no personal experience with real estate know that location is always of paramount importance. Some investors do very well with buying properties located in marginal places and finding ways to overcome their weaknesses.
A property in a truly unappealing neighborhood or city, though, will almost always be a bad investment. Investors always have only so much time and capital at their disposal and need to make the most of these resources.
Simply by going to NRIA or a similar site, it should be easy enough to identify plenty of properties that feature appealing, investment-boosting locations. As such, it will rarely be wise at all to get bogged down in investments burdened with unattractive locations.
2. An Overly Long Time on the Market
The real estate investment industry is competitive enough that most properties with a lot of potential change hands quite quickly after coming onto the market. A property that sits for many months without attracting a buyer will almost always feature some significant weaknesses.
At the very least, a long tenure on the market should be taken as a sign the property merits plenty of careful examination and aggressive negotiations. In many cases, though, it will be better to move on to fresher, less-stagnant sorts of opportunities.
3. A Less-Than-Loquacious Seller
Real estate agents and property owners who seem less than forthcoming often have something to hide. A lack of communication is quite often a sign there are problems with a home or other real estate parcel.
Of course, it is important to weigh this fact against the reality that some people are simply reticent by nature. When questions repeatedly go unanswered or receive only the most cursory of responses, though, it can make sense to move on.
4. Liens and Other Encumbrances
Some would-be sellers try to market properties that are not free and clear of legal claims. In some such cases, they will try to convince buyers to play along, promising the issues will be resolved in time for closing.
That can easily end up being the first phase of a time-wasting process. Parties operating in good faith will always get their affairs in order before trying to commence something as important as the sale of a piece of property.
5. A Lot of Superficial Fixes
Some investors make a habit of trying to gloss over the warts on homes that are rife with them. This will most often become apparent when a property shows too much evidence of recent work of superficial but cosmetically obvious kinds.
This will often suggest that a property's condition is significantly worse than it might seem at first glance. Rather than waste time waiting for an inspection, it will generally be better to look for a different opportunity.
6. Unexpected Pricing
Succeeding as an investor over the long term ultimately requires buying low and selling high relative to the current norms of a market. When an asking price is far out of line with those of roughly comparable properties, an underlying issue will most often be the cause.
Informed Investors Make the Most of Their Time and Other Resources
Being prepared to recognize these six common signs of a less-than-optimal real estate investment opportunity will always be helpful. Investors who are able to realize when the time to move on has arrived tend to perform better than their peers.