5 Tips to Help You Avoid Making Bad Real Estate Investments

Making a bad real estate investment is not like having buyer’s remorse. You can always return an expensive watch or an expensive television set, but you can’t return a home that turns out to be a lemon. If you wind up in a bad real estate deal, it could take a lengthy legal process to actually get out of it, which will only cost you more money down the line. So, the best option is try and avoid bad real estate investments before they actually happen. Yet, if you aren’t savvy, it may be hard to weed out the bad from the good. Here are five tips to help you avoid making bad real estate investments.

1. Do your research. This is may be a simple one, but the truth is that many people don’t do their research before they make a real estate investment. Why is doing your research important? You want to do your research because some American real estate investments could turn out to be a dud, especially if you purchase a property that won’t increase in value. So, you want to do your research about the community the home is in and if property values will rise or fall over the next five, ten and fifteen years.
2. Have the property inspected before you make the deal. Another way to get yourself into a bad real estate investment is to not have the home or property thoroughly analyzed and inspected before you make the purchase or put down any money. Some homes can be stricken with a number of serious problems, like mold and foundation damage. Also, you want someone to test for efficiency, because a property that needs to be completely retrofitted can wind up costing a fortune.
3. Vet the other investors. If you are going in on a property with other investors, you want to make sure that they are all legitimate and don’t have any history of scamming people. When it comes down to it, the last thing you want is to be involved – legally and financially – with a bunch of unsavory characters. Not only can this hurt your reputation, but it can also put you in the position of being held accountable under the law. The last thing you want is to be in both legal and financial trouble.
4. Don’t go in over your head. If you think about it, you probably have a budget when it comes to what you can afford in terms of mortgage, but you also have to think of all the other expenses – from maintenance and upkeep, to property taxes and insurance. If you go in over your head, you could wind up in a pretty sticky situation.
5. Only purchase a fixer upper if you can actually fix it up. If you are purchasing a fixer upper with the intention of renting it out or turning the property into a hotel or bed and breakfast, you want to make sure that you have the budget to actually make the property livable and marketable. If you don’t have the budget, you could just wind up with a dud that won’t make you any money back.