There’s a common myth that all real estate investments are good. People think that owning any type of property will be a good thing, but it isn’t always the case. In fact, you can very easily get a bad real estate investment if you’re not careful.
Here are some warning signs you should be aware of:
A lack of information
Does the property contain a lack of information about previous owners, its history, and so on? If it’s really hard to learn anything about the property, this shows there’s an obvious issue. Perhaps it has a bad reputation because of previous owners, so nobody wants to buy it? Maybe it comes with planning restrictions, so you can never improve it? A lack of information is a big red flag that you should pay attention to.
A very low asking price
We all want to snag a bargain, but some things are too good to be true. Imagine you’re looking at houses in an area, and the average price is $250,000. Suddenly, a listing pops up for a property that’s $100,000 in the exact same area. You look at the listing, notice that it has the same features as the other homes, yet it has a much lower price. In situations like this, you should start worrying about why this house is so cheap. If it ticks the same boxes as other homes in the area, there must be a problem with it for it to be this cheap. Low prices are always nice, but outrageously low ones should be viewed with caution.
No legal papers
This is a glaring warning sign if you’ve ever seen one. If there are no legal papers detailing the ownership of the property or the transaction, it just isn’t wise to proceed with anything. There needs to be a deed that details who owns the title to the property, and who the title will then be passed to. If none of this exists, your transaction isn’t technically legal. Some people will try to bypass all of this for a fast sale, but you should be really cautious about it. The legal side of buying a house is boring, but it exists for a reason. If you detect a distinct lack of lawyers around the transaction, it’s time to be worried.
A history of depreciation
Investing is all about making calculated predictions based on all the information you can gather. In real estate, you can predict if properties will appreciate or depreciate based on the past. If you’re looking at a property, and it has consistently decreased in value over the last few decades, what does that tell you? Is this a good property to buy as it can be cheap? Or, is there an issue that means it will keep depreciating? When there’s a rich history of depreciation, it makes sense to avoid investing your money.
Understanding and reacting to warning signs is crucial if you want to avoid investment mistakes. Keep an eye out for these four warning signs to learn when you should avoid making the biggest financial mistake of your life.