Investment in real estate can be lucrative, but like most investing, it needs to be strategic. As a rule, a diversified portfolio is a smart strategy for investing, including investments in real estate. But beware of investment red flags that can lead to additional costs. Some deals may seem too good to be true because they are, and others can be a good deal. Before moving forward, make sure to do your research. To help steer clear of issues, here are some investment red flags to watch out:
Real estate agent pushing to sell
In the current market both residential and commercial properties are selling fast – unless they aren’t. If something is sitting on the market, it may be an opportunity. While it is normal for a real estate agent to be enthusiastic about showing and selling a property listing, if they appear overly aggressive about moving along the process, it can be a bad sign.
A property may be hard to sell for a variety of factors. If the real estate agent is pushing, it is important to evaluate the issues at hand and determine if it is something that you can address or it’s time to look elsewhere. Evaluate the circumstances, do the research, and listen to your gut feeling before making a purchase decision.
Heavily discounted properties
You could be lucky to find a property below market value (especially in the current real estate market), but it may be a warning sign of underlying issues. Issues to look for could include structural problems, foundation issues, liens on the property and issues with title. Some properties will discount the price because of costly repairs needed. Even with a significant discount to the purchase price, when combined with expensive repairs, we recommend running the numbers and doing a cost benefit analysis. This also holds for land purchases. If a piece of land is heavily discounted, it could mean that there are significant restrictions to building or it could be factory adjacent. Land that is factory adjacent can be exposed to noise, traffic, air pollution and unpleasant odors. Conducting research is crucial to uncovering why a property or piece of land is significantly discounted.
Location, location, location is the rule when it comes to purchasing real estate. If you are not familiar with the area, learn more before investing. An up-and-coming neighborhood can be a good or bad choice for an investor. If it’s a newer area or an area going through renewal, there are risks associated with the time frame for growth. If you are looking for a more short-term investment – it may be best to look elsewhere. Growth in transitioning or new areas are not easy to predict and growth in the area can be slowed down by multiple factors such as zoning laws, permit processing and other nearby business development. Also, schools and demographics are factors that help determine if an area is good for real estate investment.
Red flags are not always deal breakers
When you come across investment red flags, it does not always mean you should write-off the property and walk away. It just means that more thought should be put into the process before deciding on purchasing. Take the time to do the necessary research. Enlist the advice and counsel of experts and potentially schedule proper inspections to learn more. Once you’ve gathered the information you need, weigh the pros and cons of investing in a specific property. Everyone’s financial circumstances are different and the decision to purchase depends on what is best for you and your investment portfolio. Talking to real estate experts can be especially valuable in helping to make sure you are not underestimating or overlooking any red flags.
If you are looking to make an investment in residential or commercial real estate, Landmark Title experts are here to help with title and escrow services. Contact us to learn more about how we can assist with the closing process.