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Houses to Avoid When Shopping for An Investment Property
I’ve written a couple of posts about which qualities make for a great, cashflowing investment property. Now I want to turn the tables and discuss what characteristics make a house a lemon. A true rotten egg. I’m talking about the kind of property that almost nobody wants, because it’s hard to rent and even harder to sell, and will eventually sap all your time and money.
No one wants to be saddled with a property like this, but fortunately, there are a few things these houses tend to have in common. Granted, there will be some items on my list that you won’t agree with or maybe won’t even apply to you. However, in general, here are some of the qualities you should avoid when shopping for buy-and-hold real estate.
- Anything other than 2 to 4 bedrooms; 3 bedroom properties are usually best
- Huge yards
- Tiny yards
- Wonky floor plans
- Older than 30 years
- Gravel driveways
- High crime rate
- Lower performing schools
- Located on a busy street
- Located in the middle of nowhere
- Located in an area prone to natural disasters
- High property taxes
- Trashy neighbors
Each of these are what I consider to be areas of concern when shopping for properties. I’m not saying they’re dealbreakers, but they definitely make me stop and think. That said, the list above should be viewed simply as a guideline to help you weed out bad properties. It is not exhaustive by any means, nor will all of these characteristics apply to every investor. In fact, some may look at this and think, “That sounds like my kind of house!” Some investors prefer poorer quality properties because they can get them for a steal, and then work their magic to turn a profit, either through rental or reselling. And hey, if that’s what works for them, more power to them.
However, each of the items listed are there for a good reason. For buy-and-hold investors looking for a reliable, cashflowing property that will provide regular income, these are factors that should at least give you pause before signing on the dotted line. Why? Because usually when you have a house with these characteristics, you’ll have to deal with lower quality tenants, constant repairs, or both. These scenarios will quickly eat away at your profit, and for some, your sanity. Just kidding. That probably won’t happen, but you are virtually guaranteed to see dwindling profits if you buy a “rotten egg” property.
Let my list be a word of caution to you, especially if you’re new to the game. Dealing with a lemon of an investment is draining on your bank account, your time, and YOU.
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