Buying Investment Property The Investment Property You Should Never Ever Buy by Sylvia Shalhout December 20, 2017February 10, 2019 by Sylvia Shalhout December 20, 2017February 10, 2019 There are a lot of articles out there for real estate investors that talk about what the best investment property looks like. Unfortunately, investors are usually stuck sifting through all kinds of investment property that don’t exactly match the characteristics of the best real estate investment property. Something else real estate investors have to know then is what the characteristics of the worst investment property are. If an investment property you’re looking at checks the list for one or multiple of the following characteristics, know that you should move on to the next one. The Worst Location Once in a while, you may find an investment property gem in an awful location. You might be idealistic in thinking that the location won’t have any effect because the real estate property is beautiful and well kept. In reality, if the run-down location has a poor economy and a high crime rate, it will take forever to get any tenants to rent there. This means it’ll be years before you ever start to make money back on your investment if you ever even manage to. Other property buyers will probably recognize what you ignored in the bad location and you won’t be able to sell the property either. Don’t take the chance and move on to the next property. Related: Worst Places to Invest in Real Estate: Avoid These Cities Located in a One-Industry Town Another factor to consider when looking at the location of an investment property is the economy and the industries (mining, tourism, government, manufacturing, etc.) supporting the town. While a one-industry town is not the worst location, it could leave you with a really bad investment property. The reason for this is that one-industry towns are way too risky. The economy of the town may be booming now, but if that industry takes a hit or is relocated to another town, there will be no other industry to fall back on. Remember, for the best investment properties, you have to think a few years ahead in case you end up holding on to the investment property. Long Time on the Market Has the investment property you’re considering been on the market for a really long time? If so, there is probably a good reason why. Good deals will be swept up quickly by real estate investors. While you may see some potential in the investment property, investigate the situation well as there may be many reasons as to why this could be the worst investment property that other real estate investors wouldn’t go near. Another thing to consider with time on the market is when the seller of such a house has a high asking price and refuses to negotiate and lower the price. This is a red flag for the worst investment property: most likely this seller lost a lot of money on the property and is determined to make it back, no matter how long it stays on the market. You’ll end up overpaying for an investment property that is going to lose money. Questionably Credible Property Seller Do you know the seller of the investment property? Have you asked around about his/her reputation and credibility? You should always know whom you’re dealing with when it comes to real estate. An investment property with a sketchy seller will probably end up being one of the worst investment properties. For example, if the seller isn’t being honest about all the facts about the property or refuses to let you do an inspection upon your request, know that something is up. When you perform real estate investment analysis and the numbers you get don’t come close to the numbers the seller offered up at all, then again, this is a sign you are dealing with someone dishonest. If you do business blindly in this way, you’ll end up with bad real estate investments. No Rental Income An investment property that doesn’t generate any rental income can end up being one of the worst investments you’ll make. This refers to properties like second homes and investment in land. Why would you ever consider investing in something that doesn’t make money through rental income in the first place?! A lot of people who invest in this way are counting on the value of these investment properties eventually going up. This may happen in time, but the loss lies in the fact that your money could have been sitting in an investment property that was making you money over the years. Negative Cash Flow Property Expensive real estate properties that require a larger-than-life investment are not a good idea. These properties are usually in high-end neighborhoods that don’t see an influx of tenants. Basically, this kind of investment property will end up being a negative cash flow property: you won’t see any profit from the investment. Avoid negative cash flow properties at all costs. Your goal is to recognize and nab positive cash flow properties that will let you make money sooner rather than later. One way to ensure you’re finding a positive cash flow property is to use Mashvisor. Mashvisor will calculate the cash flow of a property, saving you the time and effort and preventing you from investing in a negative cash flow property. Related: Real Estate Investing for Beginners: How Much Cash Flow is good for Rental Property? Negative Gearing Property A negative gearing property is one that doesn’t generate enough rental income to cover the interest costs of the owner or even its own maintenance. You’ll have to have other sources of income just to support this kind of investment property. The only way to make money with a negative gearing investment property is to sell it. Because you can never guarantee a good deal or even that anyone else will want to come near a negative gearing property, this kind of real estate can be one of the worst investment properties. You want to look for positive gearing properties; at least if you’re not making a profit for a while, you have some kind of financial stability to cover your interest costs and upkeep of the rental property. Related: Positive Gearing and Negative Gearing in Real Estate Investing Extremely Neglected Investment Property On paper, many investment properties can look like gold mines, even with a few maintenance repairs revealed upfront. This is why inspecting the investment property in person, even with a professional real estate inspector, is always a good idea. Upon seeing the investment property, you may find that it has been badly neglected for years because of a lack of property management. You may end up finding countless expensive repairs that will run way too high, making it a bad investment choice. Knowing what the worst real estate investment property looks like will help you avoid awful investment properties that may look good initially. If these characteristics apply to an investment property you’re considering, take a step back and think twice about moving forward with it. There are better deals out there and you don’t have to rush into any of these types of investment properties that you’ll end up regretting. Alternatively, for finding the best real estate investment property all across the US, check out Mashvisor. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL Cash FlowLocationRental Income 0 FacebookTwitterGoogle +PinterestLinkedin Sylvia Shalhout Sylvia was the Content Marketing Manager at Mashvisor. As a real estate writer, she has been covering topics for the beginner and advanced real estate investor, helping them make smarter decisions as well as real estate agents looking to take their business to the next level. Previous Post Looking For the Best Way to Become Rich? Invest in Rental Property! Next Post What Are the Reasons for Stagnant Rental Income? Related Posts How to Choose a US Housing Market for Rental Property Investing: 8 Factors What Are the Benefits of Investing in Real Estate? Real Estate Investing 101: How to Find Positive Cash Flow Properties in the US Housing Market Airbnb Rental Vacation Homes: A Good Strategy to Make Money in Real Estate? How to Find Real Estate Comps Most Effectively Buying a Rental Property With No Money Down Should You Invest in Zillow Homes for Sale? Here’s How to Evaluate What’s a Real Estate Investment Calculator and Where to Find the Best One? The Best Tips for Buying Rental Properties That You’ve Ever Heard Should You Buy a Cul de Sac House? How to Generate Passive Income from Multifamily Real Estate Investing Why & How to Invest in Foreclosures Near Me Leave a Comment Cancel Reply Save my name, email, and website in this browser for the next time I comment.