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Your Next Investment Property – 5 Pitfalls to Avoid

Your Next Investment Property - 5 Pitfalls To Avoid

Finding a bargain investment property on paper is only half of the process of property investment. The other half of real estate investing is going down to the property to examine the real estate investment property physically for defects either in terms of the construction and legal title and other liens that can be on the property. You do not want to spend lots of legal costs later to undo the bad lemon you bought into. This article will highlight five possible things to consider when searching for your next investment property.

  1. Unless you find a property that is really run down and you want to tear it down to its foundations, you want to look out for properties that might have potential electrical and plumbing problems. The reason why this is critical is that, wiring and plumbing is usually hidden behind walls and other furniture fixtures and repairing them can be a very costly affair since you have to hack into the walls and run the piping and wiring if the problem is very serious. If you are new to property investing try to bring an electrician along with you when you are doing the property inspection.
  1. Foundation problems are usually harder to spot. When walking around the property, look for cracks appearing at the side of the house and the foundation that goes into the ground. Look for large unusual holes found at the side of the property and cracks on the exterior paint of the building. You might want to bring builder/carpenter and a contractor along to figure out how much it would cost to fix the property if you suspect the repairs involved will be substantial. You can also bring them along to give a “grim estimate” to the house owner and bring down the cost of the property.
  1. Roofing problems can be a persistent nightmare to you and your potential tenant if you are purchasing the real estate for tenancy purposes. When inspecting the house, look around the ceiling near the windows and around the edges of the walls to look for new paint or yellow spots or cracks with water in them. Most sellers would be smart enough to eliminate the water bubbles after a heavy rain when trying to sell the property, but it is always important to figure out if there is a major leaking roof which might cost you are lot to repair it. Use this defect to negotiate the price of the property.
  1. Another reason why the investment property in question might be a bargain might be because there are legal problems associated with it. Common ones include, multiple owners that cannot agree whether to sell or not. Litigation here would be futile and you should avoid such a property once you learn about it.
  1. Bankruptcy of your seller or one of the part owners of the property, depending on the legal proceedings of your state, may affect your ability to transfer title quickly. Most states make it a requirement that the receiver of the bankrupt has to agree so pay careful attention to the bankruptcy legislation of your state. That being said, sometimes you can snag a bargain quickly so do your homework before purchasing such an investment property.

In conclusion, these five pointers can be used as a starting point for you to evaluate your property investment. Spend some time to think rationally about the properties that you have seen and see if they have any of the above flaws and consider if you want to continue purchasing them and whether the costs that you may incur in fixing them will justify the discount of the property to the market value.

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