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5 Signs Its A Bad Investment

Justin Pierce from The Washington Post says too many new real estate investors are “easy prey.” Nobody wants to be “easy prey” but unfortunately he is right, bad deals and advice run rampant in the industry.

Veteran investors have even fooled by the debauchery of bad deals posing as “real deals.” It is all too easy to get wound up in shady deals, so-called “off-market properties”, and numbers that are just too good to be true. Here are the 5 Signs Its A Bad Investment…..

 

1.) The Real Estate Investor’s Numbers Do Not Add Up

Misrepresentation of data is not bad math. It is simply a lack of integrity that will send you packing your bags out of the real estate investing industry.

Do your own due diligence and do not take their numbers as fact. Tangible metrics, rather than estimates or projections matter. Base your numbers off of your own rehab budget, comps, rents in the area, and carrying/closing costs. Ask questions detailing everything the house needs to be updated in order to sell for top dollar. Do not waste time visiting bad deals because you did not take the time to do your own due diligence.

2.) Lack Of Integrity 

One must trust someone, like someone, and know someone to do business with them. No matter where the deal is taking place crowdfunding online or your local REIA, without trust there is no deal. Multibillionaire and author Joe Huntsman Sr. says, “There are no moral shortcuts in the game of business or life.”  “There are, basically, three kinds of people, the unsuccessful, the temporarily successful, and those who become and remain successful. The difference is character.”

Real Estate crowdfunding is on the rise and investors should look for similar signs as traditional investing, even though it is online. Factors to look out for are fraud, low credit standards, and lack of investor protection if a crowdfunding platform does not give info on how they protect investors or has a lack of funds, pass on the deal.

 

 

3.) War Zone

Location is a large contributing factor when deciding if a deal is a real deal. Investors fall all too easy to the temptation of a beautiful property in a horrible area. Optimism is nice but let’s be realistic a beautiful property in a bad area all depends on if people want to live in that area.

Dozens of factors attribute to location. Such as crime levels, school quality, and the overall health of the economy. If you are considering a property in a rough part of town, proceed with caution no matter how good the numbers may seem.

 

4.) Closing Costs, Holding Costs, And Sales Costs

Picture processing a lead, doing all your due diligence, and driving 45 minutes out to the property only to be met with disappointment. Many newer investors are so ready to do a deal and are quick to jump to conclusions. Failing to consider closing costs, holding costs, and sales costs will take you out of the game. Even if all the numbers add up but the costs are about 5k or so below your maximum allowable offer, do not do the deal.

We are human beings who make mistakes. As well every property has hidden costs. A once thought of 10k profit can quickly turn into zero or less! Carefully consider all costs before pulling the trigger on any “deal” not doing so can take you out of the real estate game permanently.

 

 

 

 

 

5.) Anxious

Anxiety is a not a good sign to have when investing in real estate. For many of us, we remember first starting out and having that gut feeling something is too good to be true. Are you restless? Tense? Clammy Hands? Feeling fatigued or sweating profusely? These are all signs of anxiety and at any time leading up to the closing day you are feeling anxious about the decision. Trust your gut and back out of the deal before it is too late. Really avoid getting in the deal in the first place remember integrity and your word is everything in this business. Look out for these “5 Signs Its A Bad Investment” on every deal you make.

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5 Signs Its A Bad Investment

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