Seven Rental Property Red Flags

Property Red Flags

Almost everything can be fixed or managed, except the location of a property. Now, that doesn't mean there aren't critical red flags that require digging deeper and ensuring the right plan to manage. Some may be beyond your comfort level and experience, and others may be manageable. These are some of the most common red flags:

Flood Zones

I avoid flood zones as it requires additional insurance and could complicate things. To check if the property is in a flood zone, you can go to https://msc.fema.gov/portal/home.

Structural Damage

It would be best to always inspect the building and units as part of your due diligence. If your inspector identifies a structural problem, you may need to hire a separate structural engineer to review and provide a detailed report on the problem.

Mold

Mold can cause health problems like headaches and breathing problems. It is important to inspect the moldy area to identify the source of the problem. If it's a pipe leak, you should inspect all areas and possibly replace wood and drywall components, depending on the extent of the problem. In a basement, the problem may be due to poor drainage. If that's the case, you may need to start from the outside in. Inspect gutters, level the area around the building, and possibly add a French drain outside to improve drainage. Once no water gets in, you can move on to clean up the mold and treat the area to prevent future mold growth.

Water damage

Always look for signs of water damage when walking through a building. Roof water damage can be an indicator of a roof problem. Poor drainage is a common problem in older buildings. Also, look for water damage around windows.

Roof

The age of the roof will be part of most disclosure documents. It's good to double-check this information as the roof is an expensive upgrade that should be factored into your numbers if it becomes apparent that it will need to be replaced.

Bugs

Monitor the property and look for damage from termites and other possible critters. This is another one that might require a professional inspection if your general inspection points to problems.

Private Utilities

Personally, private utilities are a red flag. I avoid septic tanks and wells. That's a very personal decision, but something to consider when buying a property. Many places do not have access to public services, and this could be the only way to acquire a property. My recommendation is to contact an expert to ensure there are no problems. Septic tank problems can be expensive to manage.

In general, the most important step in the process is to have the property professionally inspected. This will give you clues about potential problems and help you properly plan your capital expenditures for a project.