Buyers Beware - Worst Types of Investments

As an experienced real estate agent or property investor will say, a cheap buy is not always a good buy. A property that seems like a good idea to buy at the surface might not always be worth it. Looking into a property’s financials and rental history might produce a clean bill of health but what if things still do not add up? The following list is a compilation of properties that could seem like a good idea on the outside but will make you want to take another look before making a possible wrong step in your financial and investment career.

Investments That Don’t Generate Cash Flow

Many think that just because it would be an addition to your real estate portfolio that the property would generate cash flow. Most properties do indeed generate a good cash flow some do not and even some bring in a negative cash flow. So many people invest in a property that they should not just because they hope the value will eventually go up - don’t hope. Always make your investment decisions on facts. Even if the property were to eventually go up in value you will need to reconcile for the years that it was negative to your portfolio.

Air BNB or Rental Properties in Bad or Strict Rental Areas

Do not be fooled - you cannot just buy a property and rent it out long term or short term, like an air BnB or VRBO. Some areas have strict rental policies that will make owning and renting a property like this a nightmare. ALWAYS check with local ordinances before making the leap and purchasing a property for this purpose.

Condos or Time Shares

Condos or timeshares are not even a real estate investment like many think. There is no way that you will be able to guarantee the cash flow, income, or future value of the property. Plus selling a condo or timeshare is near impossible, and when you do finally sell you will only get a small percentage of what you originally purchased it for.

Property Development

Real Estate development is high risk with rising construction and market prices. There are so many things that can go wrong at any time. Entitlement issues, city approval of permits, labor shortages, landscaping issues, road permits, etc just to name a few. Not to mention that the entire process is costly. Your return might not be seen for years or even decades later. This type of investment is not for those who are looking to see a return soon and should be left to those very experienced investors.

Don’t let this list of possible bad investments scare you away from purchasing your first investment property - there is a way to find a good investment that will diversify and grow your portfolio. Speak with your local agent and they will be able to guide you to find an investment that fits your budget, experience, and needs.

Anthony Hanks is available for investment consultations in DFW. Not only an agent, but also an investor of the BRRRR strategy. Reach out today to get started!