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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Anissa Olivares
San Antonio, TX · Member since 2021 · 25 posts · 10 votes
4y
NEW INVESTORS it is very important to share your wants, needs and what you don't want when it comes to purchasing your assets. I always ask my investors what their "hard passes" are. It is pointless and a waste of time to send out potential purchases if they have "hard passes" attached to them. Don't feel bad or picky there is always a way to tailor the purchasing process. There are constant deals revolving in and out of pipelines. Its your money use it how you want :)
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
4y
Quote from @Justice Newland:

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.

Almost anything can be solved by throwing enough money at it. Most people who want investments don't want to throw money at things that won't bring a return, or, worse, create a negative return. If I had a house next to a sewer plant I could probably demo the sewer plant if I bought the city a new one somewhere else, or I could salvage the house by having it moved to another lot. Neither solution is likely financially feasible.
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Anissa Olivares
San Antonio, TX · Member since 2021 · 25 posts · 10 votes
4y
Quote from @Sean Ross:

Saw a SFH with 87 windows.
That would be a hard pass from me!

That would be a hard pass for me too!!! :) lol
0 Reply
Anissa Olivares
San Antonio, TX · Member since 2021 · 25 posts · 10 votes
4y
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

From experience the only time this would be an issue is when a family is looking at a home. I'm not sure what this property will be used for however I don't feel that being next to a major street has ever stopped anyone from living in a home or renting. Good luck !
1 Reply
Anissa Olivares
San Antonio, TX · Member since 2021 · 25 posts · 10 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$$.

THIS!! I've heard this for multiple reasons especially if investors are buying to hold.
0 Reply
Eric V Harding
Investor · Los Angeles · Member since 2022 · 18 posts · 12 votes
4y
Quote from @Heather Hatcher:

When there's a beach in the basement..
In all seriousness, if the property is in a lava flow hazard zone or high risk flood zone, I will not put effort into looking at these properties. I know too many people affected by these zones and it's always so devastating. I don't want to put anyone in that situation if it's likely to happen.
I'm excited to see what others have on their 'no way list'.

Pahoa, HI?
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Marco Bario
Specialist · Frederick, MD · Member since 2017 · 475 posts · 454 votes
4y
These days there are more and more municipal regulations that make me look elsewhere.
For instance, where I live in Los Angeles County, there is a post-pandemic eviction moratorium extended until June 2023. In other places, annual rent increases are capped at low numbers with no allowances for inflation or rising costs. Oxnard, CA recently passed a 4% cap on annual increases.

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Rhonda Greenhaw
New to Real Estate · West Park, FL · Member since 2022 · 17 posts · 8 votes
4y
Quote from @Heather Hatcher:

When there's a beach in the basement..
In all seriousness, if the property is in a lava flow hazard zone or high risk flood zone, I will not put effort into looking at these properties. I know too many people affected by these zones and it's always so devastating. I don't want to put anyone in that situation if it's likely to happen.
I'm excited to see what others have on their 'no way list'.

Whoa! That is super bizarre !!!
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Rhonda Greenhaw
New to Real Estate · West Park, FL · Member since 2022 · 17 posts · 8 votes
4y
Quote from @Anissa Olivares:

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$$.

THIS!! I've heard this for multiple reasons especially if investors are buying to hold.

Would you feel that way if it were a STR? I'm just meeting with pool contractors now! Yikes!
0 Reply
Brian LarsonPro Member
Investor · San Jose, CA · Member since 2018 · 313 posts · 230 votes
4y
A haunted house .... hehehe
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John Bartlett
Member since 2021 · 62 posts · 46 votes
4y
@Alicia Marks just passed up a hotel, that had ghost. It was also poorly constructed only a few years ago. One of the locals told me the apartments on the same hill next door also had ghost.
1 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y
Quote from @Rhonda Greenhaw:

Quote from @Anissa Olivares:

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$$.

THIS!! I've heard this for multiple reasons especially if investors are buying to hold.

Would you feel that way if it were a STR? I'm just meeting with pool contractors now! Yikes!

I used to be a pool service person, and then a pool builder. Pools are no big deal if you don't mind spending the money. Never allow tenants to service the pool, you must hire a service company and pay them well. They will keep the pool clean and take care of all repairs......
And make sure you have security fences and alarms for liability....
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Matt Bishop
Rental Property Investor · Dallas, TX · Member since 2020 · 161 posts · 88 votes
4y
I only buy and lease Single Family Homes in new or newer desirable, fast appreciating neighborhoods. I only consider neighborhoods I would want to live in with highly rated schools I would send my kids to.
1 Reply
Matt Bishop
Rental Property Investor · Dallas, TX · Member since 2020 · 161 posts · 88 votes
4y
@Matt M., if you think today's prices are inflated, just wait until next year and they'll be up another 25%.
2 Reply
Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
4y
Quote from @Matt Bishop:

@Matt M., if you think today's prices are inflated, just wait until next year and they'll be up another 25%.
Then looks like another year will go by and I’ll have trouble finding deals. It is what it is. I’d rather not buy than pay astronomical amounts for garbage
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Michael P. Zembower Jr.
Rental Property Investor · Youngstown, OH · Member since 2018 · 6 posts · 8 votes
4y
Required repairs that will put us upside down on the investment. It’s amazing to me that some sellers have a difficult time acknowledging the scope of work is extensive and the sale price should permit us to be below market value after the overhaul renovation. Then again, there’s always a buyer 🤦🏻‍♂️
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Nancy Truong
Attorney · Houston · Member since 2022 · 84 posts · 116 votes
4y
My hard pass: 1. electrical damage 2. large plumbing issue 3. outstanding liens when combined are way above property value.
0 Reply
Henry T.
Member since 2022 · 1k+ posts · 1k+ votes
4y
Location.
It can be the worst house in the world, but if the location is good I want it.
3 Reply
Hannah Atherton
Real Estate Broker · Portland, OR · Member since 2021 · 16 posts · 12 votes
4y
A home I wouldn't live in personally.
3 Reply
Karissa Sampson
CO · Member since 2020 · 63 posts · 40 votes
4y
My only hard passes would be too many major repairs all together, flood zone, and bad neighborhood. With enough money, you can fix a house's problems but you can't change the neighborhood the house is located in or move the train tracks.
I used to say foundation and roofs issues but now, it really depends on what those issues are.
Current property under contract has "foundation issues" but when I had a structural engineer come out, the problems were far less serious than the inspector thought.
Now, I have seen/heard nightmare stories about foundations issues too. Adding up $20k foundation + $20k roof + $10k sewer + $? asbestos mitigation + the entire remodel is a bit much. BUT-in the right market, the right house, and if the numbers work it might still make sense for some cases. Know your market, know your business and its finances, and trust the numbers.
1 Reply
Alicia MarksPro Member
OP
Fort Worth, TX · Member since 2020 · 1k+ posts · 2k+ votes
4y
Quote from @John Bartlett:

@Alicia Marks just passed up a hotel, that had ghost. It was also poorly constructed only a few years ago. One of the locals told me the apartments on the same hill next door also had ghost.

I know a guy in Denver that can help with that! He was my Uber driver and has a ghost hunter team. Interesting discussions on my ride.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @Justice Newland:

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!
I put EV chargers in all my new construction but there is no way an EV charger alone will raise the value of the home significantly since one can be done for 200 to 500.00.. Maybe in the rental realm it could add some value in the rent charged and thereby increase the value of the asset..
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Corey Martin
Real Estate Agent · Nashville, TN · Member since 2022 · 54 posts · 36 votes
4y
Quote from @Eric Gerakos:

Any C or D property.

That's the meat and potatoes when it comes to investing. Granted, certain D properties can be a problem but I believe that's where you'll find the deals.
0 Reply
Marc Kenyon
Investor · WI · Member since 2022 · 13 posts · 7 votes
4y
House with an underground basement next to a wetland area
Wildfire-prone areas
I second the motorcycle gang area
Foundation issues
But mostly, i agree with previous post about too many issues - single issues in and of themselves can be overcome, but cumulative issues usually don't pencil out, unless the price is right!
1 Reply
Corey Martin
Real Estate Agent · Nashville, TN · Member since 2022 · 54 posts · 36 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$$.

That's a fantastic thought. Pools in the long run require alot of time and attention. Do you advise clients to not do those if its a property held for appreciation?
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