Fancy investing in real estate? It can bring in a real profit and long-term stability, says financial advisor Mike Collins.
BUT it can be disastrous if you aren’t aware of red flags that you should be looking for with real estate.
You may want a doer-upper and are prepared for some problems along the way, but if this then turns into rising damp or cracked foundations, you’re in trouble.
Before investing in any property, ensure you can find some detail of the property’s history and how it’s being marketed – and indeed, whether it has been looked after.
Here are a few pointers of due diligence to consider on how a property is presented.
Been on the market a while?
A property that has been on the market could suggest a few things. At worst, people are having surveys done and there is something major wrong with it…
But it could mean the area doesn’t look good on local crime statistics or perhaps it’s in a flood plain.
And if people aren’t snapping it up, they aren’t going to be queuing up to be a tenant.
Unless you have a good idea of why the property is slow to sell, assume there is something you don’t know!
It’s always a good idea to stay away from these types of properties unless you fully intend to renovate from the ground up!
Has it been flipped?
Check the sale history of a property – has it already been bought, renovated and resold rapidly?
If that’s the case, it’s advisable to be cautious when going through with a sale like this.
The speed at which the property is ‘reconditioned’ could mean that work hasn’t been done to professional standards.
Thinking of investing in a property like this? Collect any paperwork regarding the property’s infrastructure – things like insulation or plumbing – to see if things have been correctly installed and tested.
Lack of photos?
Ever wondered why the property photos don’t always match up with the plans on estate agent websites?
It could be that they don’t want you to see how small a room is – perhaps a room described as a bedroom would fit one single bed in at best.
A lack of interior snaps could also suggest the property is not in good condition and unfit for photographs to be taken.
The more details displayed the better.
High property management turnover
Property management companies need to keep apartments full.
But a high turnover of people managing certain sites could mean there are profound issues with the property rather than the people letting it. It could be recurring maintenance costs or a problem with rental prices.
But I would consider this a red flag as it may mean you will have difficulty in managing the property.
You certainly don’t need to be a real estate agent to know a good investment when you see one. But when it comes to signing up for a long-term investment, I hope these tips might help!