Five Warning Signs of a Poor Real Estate Investment

When comparing potential investment opportunities, research is an essential first step to get the best returns. Glossy brochures can obscure structural issues, and not all ‘up and coming’ …

When comparing potential investment opportunities, research is an essential first step to get the best returns. Glossy brochures can obscure structural issues, and not all ‘up and coming’ neighbourhoods live up to their promise. The first step is to identify what your investment goals are. Are you looking for an apartment to rent out as a source of passive income? Or a fixer-upper to flip? Keep your goals in mind as you start comparing properties. Although it can be impossible to predict what the housing market will do over the next few years, you can increase your chances of avoiding a dud by keeping an eye out for the following red flags.


1. The property has spent over six months on the market.

Not every market is as hot as New York or London, but generally if a property’s been on the market for over six months you should treat it as a red flag. Good properties tend to be snapped up quickly, while bad deals languish for months. Naturally, you shouldn’t write off these properties completely if they seem like a good fit on paper, but you’ll want to do a bit of extra poking around to find out why it hasn’t sold yet.

2. The neighbourhood is sketchy or lacks basic infrastructure.

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Many beginning investors look at less desirable neighbourhoods for a starter investment that’s affordable. However, remember that location is the one thing you can’t change about the property. If a realtor describes the neighbourhood as in the process of gentrifying, take a walk around and look for signs of this. On a basic level, do you feel safe walking around during day and evening hours? If you don’t, potential renters won’t either. Are there grocery stores, schools, and parks nearby, or is it located in a food desert? Are there transportation links into the city? Is the property located near noisy train tracks or an industrial park? These are things you can’t change, and it’s probably not worth your trouble.

3. The seller can’t provide hard facts when asked.

As you learn how to plan your budget better for an investment, you’ll see that numbers matter. If the seller can’t or won’t provide you with statistics related to profits, vacancy vs. rental rates, and comparable sales in the area, this is a warning sign. You need to be able to run the numbers to determine whether the returns will be sufficient. If the selling agent dodges requests, you can either do your own research or simply pass.

4. The property doesn’t live up to its photos.

Have you ever fallen in love with a dream condo only to visit a ramshackle apartment instead? Never buy a property sight unseen, unless you are buying off the plan and overseeing construction yourself. A property may look like a great investment according to its statistics, description, and photos, but it may be in decline in reality. You need to visit the site and carry out a professional survey to uncover potential maintenance issues.

5. There are environmental issues.

Finally, don’t neglect to take a look at the property’s lot and any environmental issues lurking beneath. Is there a polluted water source nearby? Was the home constructed with lead based paint? Are there old oil tanks buried below? These are things you need to find out about ahead of time, because they’ll be your environmental mess to clean up.

These are just a few of the top red flags to watch for before you rush in to any property purchase. 


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