QOTW: What are your "hard pass" items when evaluating real estate

Fort Worth, TX · Member since 2020 · 1k+ posts · 2k+ votes

Welcome to our Question of the Week! We have a lot of people who are entering the world of real estate investment who could use your wisdom. When evaluating a property, what are your automatic no or exclusion list items and why? Was there an experience that caused you to exclude them? How did you handle that experience?

Let's help each other learn to analyze a deal quickly and effectively. Share your thoughts!

[email protected]Podcast Guest on Show #204

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Sean Ross

Member since 2022 · 137 posts · 115 votes

Saw a SFH with 87 windows.

That would be a hard pass from me!

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Jon Martin
Member since 2022 · 1k+ posts · 1k+ votes
4y
Quote from @Dong Yan:

Quote from @Jon Martin:

directly fronting a busy street.

you think the locating facing the busy street is a deal breaker?

For a personal residence and/or future sale to a family minded buyer or renter, yes. Multi family property or STR would be ok and potentially a bonus in the right area.
1 Reply
Branden Yang
Member since 2022 · 42 posts · 10 votes
4y
Really bad foundation issues like cracked floors.
1 Reply
Charlie MacPherson
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
4y
TIGHT TANKS! That's when the property has no access to town sewer and cannot have a leaching field due to proximity to a water source.

In that case, you install a giant (2500 - 5,000) gallon buried tank to hold all waste water and sewage. Every time it gets filled, you pay several hundred dollars to pump it out. Want to run the shower until it gets nice and hot? You're filling the tank. Running the cold water to wash your vegetables? You're filling the tank. Rinsing the dishes? Getting a glass of cold water? You're filling the tank.

This is where the saying came from "If it's yellow, let it mellow. If it's brown, flush it down." Living with that would drive me nuts.
3 Reply
Ling Lin
Member since 2022 · 31 posts · 9 votes
4y
anything out of state at this point. i am not ready to invest out of state
2 Reply
Erin ChurchPro Member
Real Estate Agent · North Augusta, SC · Member since 2017 · 254 posts · 233 votes
4y
Quote from @JD Martin:

Quote from @Mike Gordon:

Flood zone, a pool, and foundation cracks. I looked at one house with a really bad animal smell and passed because all of the flooring would have had to be replaced and the house repainted.

See, that's funny. I see the same house and I think money. In fact, I bought a house once years ago I still call the "cat piss house". The smell was so bad when you went in it would be like an instant asthma attack. But I got it really cheap, and I factored in the idea of tearing all floors and bottom half of walls out to solve the problem. In reality, my flooring contractor (all hardwood floors) was able to sand the smell out of it - and let me tell you, you've never smelled anything like freshly sanded cat piss - and 98% of the stains, and put down 3 nice thick coats of polyurethane, and the smell was completely gone at the end and never came back.

I joke that when walking into a super stinky house that it "smells like money" because no one else wants it :) As long as you factor in the cost of the work to fix it up, it can be a really good deal :)
As for my hard passes - flood zones, high crime neighborhoods (would I go there alone), if it's a rental, then no pools.
I did a live-in flip in a flood zone, we moved out a couple of months before listing it and the day before an open house, the creek rose into the yard. The house was fine, but we had debris on the fence. Turns out there was a berm in the yard (luckily). It was the only time in 2.5 years that the water had come out of the creek. At that point, I knew I was never going to buy another high-risk flood zone property. (Also, flood insurance is crazy expensive.) :)
3 Reply
Jon McCarron
Real Estate Agent · Salem, MA · Member since 2014 · 114 posts · 78 votes
4y
For a buy and hold rental investment, passing on anything with a septic system (leaching field or tight tank). Expensive to replace. I feel like a multi-family building would fill a septic tank much, much faster than an owner occupied home, which means more frequent pumping. With a septic system, you are stuck with the bedroom count you have; therefore, less chance of a value add.
2 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
4y
9 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y
Quote from @Branden Yang:

Really bad foundation issues like cracked floors.

That's a money maker!
1 Reply
Paul Gerlich
Member since 2022 · 3 posts · 2 votes
4y
One I've recently learned.. Never buy a house on a hill without a driveway. It's pretty common with older homes in the Quad City area where I'm from.. Makes everything 10x harder.
2 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y
Quote from @Isaac S.:

can't be next to motorcycle gang clubhouse,

Well ok, I said no conditions, but ya got me there. You gotta be at least out of bullet range. There was a shoot-out at a HA house out in the country here between 2 rival gangs.....over 1700 shots fired and no one was hit. Hard to believe, but I guess that's what happens when you combine too much booze with not enough practice.....
3 Reply
Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
4y
Violent crimes--Car jackings, Murder, Rape, Armed Robberies, and places with (a lot of) lesser crimes.
2 Reply
Kelly Asmus
Real Estate Broker · Portland, OR · Member since 2018 · 126 posts · 71 votes
4y
Flood zones, serious foundation issues and really rough neighborhoods. Otherwise evaluate the property and if it pencils, then get creative!
2 Reply
Jennifer Jo McCallonBusiness Member
Member since 2020 · 62 posts · 59 votes
4y
I live in the Bay Area (CA) - I would be extremely cautious buying income properties in a city where there are strong tenant laws in place, eviction controls, rent control etc. City of Oakland's city council is a wild card that keeps changing the rules. While Oakland is a great place to buy/flip or live, I would not currently buy to rent f/t. Oakland still has an eviction moratorium due to the pandemic which has been extended indefinitely and has no qualification requirements- so, one can be working full time and just not pay rent.
That said, I think there are great alternatives in any area- airbnbs, furnished rentals, room rentals. And I love Pittsburgh, PA for investing as it is more landlord friendly and has really solid cap rates/income opportunities. We own a few places over there as well.
[email protected]510-545-6390
6 Reply
Rick Albert
Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
4y
Noise is actually a thing for me (although my current house hack does hear the freeway). But things like backing to train tracks, freeway is 10 feet away, etc. This is strictly for SFR/2-4 units. Not necessarily condos as that might be typical.
The reason is in any market that's not a favorable attribute and there isn't much you can do about it. When there is a lot of inventory and buyers/tenants have options, you can be sure that this property won't be one of them. I would just rather avoid it altogether.
1 Reply
Michael Lyons
Investor · Washington, DC · Member since 2020 · 10 posts · 11 votes
4y
@Andrew Bang this is a good perspective to hear from a lender, as a lot of the BP community (at least us newbies) fall into the energetic, less money category.
What can individuals who are in that position do to make a lender more comfortable, or is it just going to be accepting higher rates?
3 Reply
Andrew Bang
Lender · Texas; Arizona · Member since 2019 · 276 posts · 282 votes
4y
@Michael Lyons
Higher rates shouldn't be what a lender defaults to, if a deal has more risk , a good lender will ask for more downpayment. For a first time investor, find a great deal. Back it up with comps that show a healthy margin. Ask the lender for contractor referrals. If you use a contractor the lender knows will do good work and can get it done quickly, it will reduce their concern of a project going bad.
1 Reply
Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
4y
@JD Martin
Two things...
1-Where in Northeast TN are you referring to? (Sinkholes/limestone)
2-I have lived in two homes as an adult. Both were "cat houses". The first house I ever purchased had pictures of cats in the MLS listing. The neighbor said the lady that lived there had 7 cats. Being on a tight budget I couldn't come in and rip everything out. Removing the flooring was easy-under a slab so not as much cat smell absorbed into the house as a crawlspace would have. Had to sand the cabinets down and refinish (Couldn't afford new ones). Second house I bought (still live there) was way worse. 2 cats with no litter box!!! Had to tear everything out, several coats of commercial enzyme cleaner and several coats of kilz restoration primer.
0 Reply
Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
4y
Location is really the only deal breaker for me.
I can't move the house.
Anything that is in a D or C- area I wouldn't touch. Really no matter the price. It's just not for me.
In regards to the actual condition of the house, nothing would be a deal breaker. It's all just a matter of $. Anything can be fixed, it's just a question of how much it's going to cost.
2 Reply
Bob Anthes
Rental Property Investor · Port St Lucie, FL · Member since 2019 · 150 posts · 79 votes
4y
@Alicia Marks. Location! Other than that if the deal makes sense (cash flows) I’ll do it.
1 Reply
Kathleen Timberlake
Realtor · Nashville, TN · Member since 2022 · 11 posts · 6 votes
4y
I second floor zones and foundation issues!
1 Reply
Shane J. RenardBusiness Member
Real Estate Broker · Green Bay WI · Member since 2021 · 65 posts · 28 votes
4y
When a seller tells me how the property can make money, but their numbers do not. My question to them is always "Then why haven't you made money with the property?" or when they tell me about all these opportunities with the property. "Then why haven't you done so?"
3 Reply
Dave Van HornPro Member
Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
4y
First thing I should say is...There's no bad properties, just bad prices! I've seen people get their best deals with structural damage for example (though I still usually avoid those).

But environmental/toxic stuff I'd probably try to stay away from. Things like underground oil tanks (and the spills they can cause), asbestos removal, etc.

Older steel septic tanks can be an issue too. Not only is the replacement itself expensive but the work to dig it out and to tap into the newer system.
Podcast Guest on Show #273
1 Reply
Taylor Dasch
Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
4y
For me it is the location. I know investors who will do flips in the one bad location in my market and they seem to do okay, especially since you can purchase the property cheaper. But I always use LTR as a back up and I would not want to buy and hold in that area.
1 Reply
Brian Garlington
Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
4y
When evaluating a rental property, if tenants are in the property and they are un-cooperative as far as letting inspectors, appraisers and/or previously SCHEDULED potential buyers walk through then it is a hard pass.
They are telegraphing that they will be difficult tenants to work with and receive payments from. I've had this experience in Oakland, CA and Richmond, CA when buying rental properties. The good news is that there are so many rental properties in those areas that it is very easy to find one where the tenants ARE cooperative. Just closed on another one last month.
2 Reply
Joseph DucePro Member
Member since 2019 · 4 posts · 4 votes
4y
@Alicia Marks
If a property is in a flood zone it’s a hard pass for us. It’s almost impossible to make the numbers work when flood insurance is required for a property. It also makes the property less desirable on the exit when it comes time to sell.
4 Reply

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