Investing in real estate is a great way to grow your money, but it’s not always easy.
Sometimes, things can go wrong and turn your dream property into a nightmare.
Before you buy, make sure to watch out for these five common red flags that experts warn about.
1. Fixer-Uppers Might Be Money Pits
Buying a cheap house that needs repairs might seem smart, but it’s risky.
Fixer-uppers often hide costly problems like bad wiring, mold, or damage you can’t see at first.
“Fixing up a home can end up costing way more than expected,” says Cindy Stumpo, a home-building expert.
What to do:
- Always get a full inspection.
- Find out how much repairs will cost before you make an offer.
- Make sure the repairs won’t cost more than the home is worth!
2. Foundation Problems Are a Big Deal
A cracked foundation is a serious and expensive problem. Fixing it could cost tens of thousands of dollars.
“If you see lots of cracks in walls or doorframes, that’s a big red flag,” warns real estate expert Robert Washington.
Why it matters:
- A damaged foundation can make it hard to sell or rent the property later.
If you spot foundation problems, it’s better to walk away.
3. Cheap Construction Can Cost You More Later
If a house looks like it was built fast or with poor materials, be careful! Problems like leaky roofs or warped floors can add up to huge expenses.
“Sloppy work usually means other problems you can’t see,” says Washington.
What to check:
- Look for cracks, uneven paint, or doors that don’t close properly.
- Research the builder to see if they’ve had complaints.
4. Don’t Trust High Cap Rates Alone
A high “cap rate” (return on investment) might seem good, but it could also mean the property has issues.
“Sometimes high cap rates mean the property is risky,” says Graham Hill, a real estate consultant.
Instead:
- Look for properties in great locations with steady demand.
- A lower cap rate in a growing area might be a safer bet.
5. Skipping Research Can Lead to Regret
One of the biggest mistakes new investors make is not doing enough research.
“Even the prettiest house can fail if it’s in the wrong location,” says real estate broker Angelica Ferguson VonDrak.
Things to check:
- Local zoning rules and rental laws.
- Demand for short-term rentals like Airbnb in the area.
Without research, you could end up with a property you can’t rent or sell.
Final Tip: Do Your Homework
Investing in real estate can be rewarding, but only if you’re careful.
Take the time to research every property, hire inspectors, and ask questions.
This way, you’ll avoid costly mistakes and make smart investments.