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Even a seemingly-perfect property can turn into a money pit.
GOBankingRates spoke to expert realtors to learn five common red flags youll want to look out for.
Hereswhat you’re gonna wanna know before you make any real estate investment.
Fixer-Uppers
Buying a fixer-upper is even riskier than it seems.
You never know if the property has hidden problems, like outdated wiring or structural damage.
Always be sure you get a detailed inspection and a reliable estimate for repairs.
Dont make an offer until youve included these costs in your budget.
You might find youd spend more money fixing the property than any potential rental income or resale value.
Depending on the severity of the damage, repairs can cost tens of thousands of dollars.
Structural remediation is usually pretty costly and can turn what seemed like a great investment into a nightmare.
If you find problems with the foundation, its usually better to walk away.
Dont think itll be an easy fix.
Research the developers track record by reading reviews or checking whether theyve faced complaints in the past.
Your investment wont be worth it if the construction wont stand the test of time.
It might seem like a good thing at first glance higher returns are better, right?
But an unusually high cap rate can be a red flag that the risks might outweigh the benefits.
However, high cap rates often signal more difficult business models.
Sometimes a property with alower cap ratecould actually be the better investment.
The cap rate is lower sounds bad but the returns are consistent which is very good, added Hill.
Dont decide to buy based on the cap rate alone.
Think about the location, tenant demand and long-term potential.
A lower cap rate in a stable, growing market could be a safer and more profitable investment.
Failing to do your research can leave you blindsided by issues like zoning restrictions or even environmental hazards.
Especially if youre planning to use it as a short-term rental like an Airbnb.
Also, some cities have strict rules or outright bans on short-term rentals.
If your plan for your investment is to list it on Airbnb, youd be stuck.
Dont buy without thoroughly investigating the property, its location and the local market.
Understand the local laws and regulations that might impact your investment.
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