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!

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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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Jeffrey Albaum
Investor · Austin TX · Member since 2018 · 151 posts · 165 votes
4y
If my property manager tells me it's a no go.....it's for sure a no go!!
2 Reply
Rodney Sums
Laveen, AZ · Member since 2016 · 584 posts · 528 votes
4y
Quote from @Alicia Marks:

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!

A property that will lose money.

Being that's a broad universal deal breaker here are things that turn me off:

Negative cash flow
Deed restrictions

Title issues

Pools

Stric HOAs or HOAs that are apparently not enforcing CCRs

Low income with high crime

Neighborhood with poor appreciation history

Flood zone

Multiple offers or a property deliberately priced low to incite a bidding war

There's more but those are some main ones
3 Reply
John-Charles Bautista
Investor · Katy, TX · Member since 2021 · 10 posts · 5 votes
4y
@Jennifer Buchholz Foundation and roof issues are hard passes for me.
2 Reply
Rick Grubbs
Rental Property Investor · Salisbury, NC · Member since 2014 · 40 posts · 11 votes
4y
1. No cash flow. I'm want to take money home with me not put money into a property.
2. Dishonest seller. I've had owners lie to their tenants in front of me when showing me their property. (This man is here with the insurance company..) If they will lie to them, they will lie to me.
3. Really bad neighborhood. You can fix anything except the neighborhood.
4 Reply
Samuel Eddinger
Meriden, CT · Member since 2018 · 704 posts · 501 votes
4y
I'm looking for seven items when evaluating a location for purchase.
Price - do the numbers make sense
Location - would I be comfortable living there with my family.
Layout - is a tenant going to go into the property thinking "why did they do that".  Examples would be a 3 bedroom with only a stand up shower, a sink in the pantry, a 3 bedroom, 1 bathroom with the bathroom between the two bedroom and no secondary access, washer/dryer in the kitchen, etc.
Laundry - ability to put in hookups in the basement if not possible in the unit itself.  Good tenants do not want to go to the laundromat.
Parking - Some tenants have nice cars and do not want to park on the street.
Split utilities - Having the tenant responsible for electricity and heat is extremely important so you can keep your costs in check. Having the heat on and the windows open is real when tenants don't pay for heat! Space heater usage when tenants pay for heat but not electric is also real!
Back yard - This one I worry about the least but some people want to enjoy company with friends outside and/or have a cookout.  This is a bonus but not something I automatically disqualify for.
3 Reply
Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
4y
What is wrong for me now is not necessarily wrong for someone else or sometimes would have been ok at a different point in our business/investing career. But now our company is not buying multi-family in "D" neighborhoods any longer-- we did initially buy in these areas because the entry price is low and we were uncertain if we would have enough capital to create an income stream that would support us so we wanted to conserve our capital. Luckily we were able to successfully manage these units but subsequent purchases in better neighborhoods have had better appreciation, and are easier to manage, and now that we have an adequate income stream, we are no longer buying in "D" neighborhoods and we sold these properties.
1 Reply
JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
4y
Quote from @Luka Milicevic:

@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.

I'm up here in the Tri-Cities (Johnson City/Kingsport/Bristol). We don't see many sinkholes in the cities themselves but as you move towards the mountains you'll see more. Where I live I know of one sinkhole that swallowed the entire front of an elementary school such that it had to be abandoned, and another right down the road from me that ate half the road. There's a somewhat (in)famous one just over the mountain from me in Asheville that swallowed the entire parking lot of a thriving business and closed them down. Our underground rock here is generally either granite or limestone. The granite is fine, but the limestone gets ate away from underground rivers (cracks in the subterranean rock) and eventually the weight of the earth above it will cave it in. Then the underground water will eat away the caved-in soil, so the sinkhole ends up being almost impossible to ever solve.
In our cat house, we were fortunate that they apparently only pissed on the floors. I was fully expecting to have to rip out the original 1920's baseboards and bottom half of plaster walls to solve the problem. I don't know how the floor sanding guys were able to stand the odor when they were sanding - it's one of the worst and strongest things I've ever smelled.
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Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ 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 agree. Bad odors usually = money. Can’t tell you how much money I’ve made working for clients in the last 18 years dealing with pet odors and damage. Reason #726383 of why I don’t do pets in my rentals.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @JD Martin:

Serious foundation issues; terrible neighborhoods without realistic prospects of improvement; detrimental nearby property uses that cannot be rectified (landfill, sewer plant, prison, etc). Those are probably my major ones. Two of them are the "location x3" mantra, and foundation issues can be a nightmare to resolve or possibly cannot be resolved at all. I looked at a house one time that had a large, active developing sink hole under the garage floor. They had tried to repair it twice and when I went to look at it there was still a hole as deep as a major street pothole and as wide as a coffee table. No thanks; there's a lot of limestone and underground caves here and sinkholes can grow big enough to swallow whole houses.

Prison.. ??? pretty nice stuff surrounds San Quentin million dollar plus Marin county digs.. Also I was impressed with what surrounds the big federal pen Leavenworth KS I think they call it the big house. Seems like rentals around these prisons would be prime for the folks that work there.. so as long as those are your tenants seems OK to me
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Alan DeRossett
Investor · Thousand Oaks, CA · Member since 2017 · 306 posts · 123 votes
4y

Above ground utilities. we have plenty of properties with utilities underground and the rents are higher in areas without utility poles. Also if we can add solar and EV charging in Garages to upgrade a property a 20% Appreciation can be gained. In my local market, we usually buy and hold for a minimum of 5 years and appreciation makes us more than actual rents.
0 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y
Quote from @Matt M.:

Yep, pet smells are bad and guys like us deal with that way too much. Big money there for the right person. I've even had to re-texture all of the drywall to get rid of the smells when just doing the floors was not enough....
I've found that pet urine smells are worse than people urine smells...when you get a house where it was people peeing on the floors and not pets, that is.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
4y
Quote from @Jay Hinrichs:

Quote from @JD Martin:

Serious foundation issues; terrible neighborhoods without realistic prospects of improvement; detrimental nearby property uses that cannot be rectified (landfill, sewer plant, prison, etc). Those are probably my major ones. Two of them are the "location x3" mantra, and foundation issues can be a nightmare to resolve or possibly cannot be resolved at all. I looked at a house one time that had a large, active developing sink hole under the garage floor. They had tried to repair it twice and when I went to look at it there was still a hole as deep as a major street pothole and as wide as a coffee table. No thanks; there's a lot of limestone and underground caves here and sinkholes can grow big enough to swallow whole houses.

Prison.. ??? pretty nice stuff surrounds San Quentin million dollar plus Marin county digs.. Also I was impressed with what surrounds the big federal pen Leavenworth KS I think they call it the big house. Seems like rentals around these prisons would be prime for the folks that work there.. so as long as those are your tenants seems OK to me

Anything, anywhere in California is pretty much million dollar digs 😂 . Out here prisons go in the worst areas already, making them even worse. But that was just an example, you're right that a prison can be in a decent area and some people may not mind it. My main point was just dealing with nearby uses of property that I cannot change - others would be junkyards, slaughterhouses, etc.

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Jon S.Pro Member
Investor · Tampa, FL · Member since 2015 · 530 posts · 92 votes
4y
Quote from @Troy Albers:

If it’s for a property I’m looking to hold and rent out for a long time, I’ll generally pass on homes with pools. They tend to be a pain in the a$$.
Would you find a pool to be a desirable feature for a STR in a good STR location?
0 Reply
Ben Kappel
Realtor · ND · Member since 2019 · 54 posts · 31 votes
4y
Neighbors running a salvage yard in their front yard.
1 Reply
Sally FairchildPro Member
Investor · Newport Beach, CA · Member since 2016 · 106 posts · 84 votes
4y
@Alicia Marks
I won't buy a house that I would not be willing to live in myself.
5 Reply
Jeff Costa
Member since 2021 · 166 posts · 113 votes
4y
Previous foundation repairs: if they repaired it once, expect to repair it again when *you* own it
Wonky floor plans: strange angles or room designs that disallow basic things like couch placement or hanging a television
Flood plain: its not the cost of the insurance, but the inability to find contractors or help AFTER the flood
1 Reply
Dong Yan
Real Estate Investor · Irvine, CA · Member since 2016 · 129 posts · 42 votes
4y
Updates, while I am still debating whether to submit the offer for the property that is facing the major street, the seller already accepted the offer according to the seller they just listed the property on redfin for one day and get 11 offers and they accept the one in cash exceeded their asking price a lot.I guess the hard pass question is really situational, if the market is hot , demand is huge then there is no hard pass as long as it is fixable .Otherwise, it is personal preferences, some buyers hate the noises but some buyers don't care at all.

In summary, there is no rule fit all, the hard pass are all situational based.

Quote from @Dong Yan:
Alicia,
I was just about to post a question, I am facing the same questions right now.

If it is the rental properties the side yard facing the major street is the deal breaker or no? The property itself is perfect with nice layout and reasonable price and huge back lot . the only issue is the side yard facing the major street, shall I submit the offer or pass?

STella

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Doug JohnsonPro Member
Investor · Pittsburgh, PA · Member since 2019 · 51 posts · 8 votes
4y
Foundation issues for sure!
0 Reply
Justice NewlandPro Member
Rental Property Investor · Member since 2022 · 18 posts · 7 votes
4y
Quote from @Bruce Woodruff:

Haven't seen anything yet that I wouldn't touch - as long as there is a very decent upside $ wise. There is always a fix.

If there is a problem that can be solved with money, and you have money, then you don't have a problem. I believe that is a quote from Brandon Turner and your post made me think of it! I agree with you. I may be naive though as I do not have much experience yet.
1 Reply
Justice NewlandPro Member
Rental Property Investor · Member since 2022 · 18 posts · 7 votes
4y
Quote from @Alan DeRossett:

Above ground utilities. we have plenty of properties with utilities underground and the rents are higher in areas without utility poles. Also if we can add solar and EV charging in Garages to upgrade a property a 20% Appreciation can be gained. In my local market, we usually buy and hold for a minimum of 5 years and appreciation makes us more than actual rents.

Hi Alan! That is interesting what you mention about adding EV charging in the garage. Do you think that this is location dependent? I love that EV's are on the rise, however, I am not sure that I would get that much appreciation in Pittsburgh. Interested to hear your thoughts!
0 Reply
Robert Wilson
Member since 2018 · 64 posts · 39 votes
4y
Tbh nothing really. It would have to be REALLY bad for me to have a hard pass on something. But tenants that are not on a formal lease or "bad" tenants in general will really make me skittish on pulling the trigger for rentals.
1 Reply
John Tohme
Member since 2022 · 1 post · 0 votes
4y
sketchy sellers! People who are hiding information, or who want to do the deal in a shady way. (Those who want to avoid title companies etc.)
0 Reply
Robert BakerBusiness Member
Lender · Charleston, SC · Member since 2022 · 6 posts · 2 votes
4y
A big one that I have seen from personal experience is dealing with certain historical board neighborhood committee's for heavy construction fix and flips. The numbers have to be real good if the approval process is going to take 4+ months.
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1 Reply
Jonathan R McLaughlin
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
4y
@Alicia Marks shared property/informal easements/ROW that “have never been a problem”
For commercial: former gas stations, auto body shops or dry cleaners
1 Reply
Charles Morgan
Investor · El Paso/Socorro, TX · Member since 2012 · 365 posts · 75 votes
4y
For me, an HOA or home in a trailer/RV park.
2 Reply

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