What are your dealbreakers for buying investment properties?

Question

When you look properties to buy and hold, what are your deal-breakers? What, if you see/find it, will kill the deal for you?

Jeff B. · Answer

Repairs. I looked at a 10 unit where every dual pane window would need to be replaced (if you see anything between the panes, it's toast). In addition most floors looked like a windy day at sea with undulating floor coverings.

I consider weekly cash payments as a sign of unstable tenants with under the table incomes - - and I'll pass on the property regardless.

Owen Dashner · Answer

I agree about location. Proximity to train tracks, heavy industrial areas, higher crime areas. Bad next door neighbors (exterior of house and lawn in disrepair, large dangerous breed dogs or dogs that bark nonstop while you are there). Flood zones (although I will buy there occasionally if the neighborhood is otherwise good and the price is right). If the cost and time of rehab are less than the ROI I am looking for. Bad foundations that are not fixable, really bad mold and/or water intrusion.

JD Martin · Answer

Bad neighborhood. Immovable undesirables (landfills, sewage plants). Difficult structural problems, especially foundation related. Dishonest sellers, and I'm not talking fudging I'm talking outright lying.

Those are in addition to the basic math on the property. If the math doesn't work it doesn't matter if it's the Taj Mahal.

Owen Dashner · Answer

If you have ever tried to sell a property close to train tracks, you will know what I'm talking about. Seems like every other prospect brings it up as a complaint. Plus, the vibrations from trains over a long period of time can cause foundation shifting/damage if your property is close by. Just sayin'.

It's a personal choice though, and there will always be people who are comfortable next to train tracks, in high crime areas, in flood zones, etc., but I try to avoid them myself.

Dennis Canon · Answer

I agree with @Mike Garza. It begins with the numbers.

You also have to know the neighborhood and know the type of people who will be renting in that neighborhood.

Dante Pirouz · Answer

@Owen D. By the way I haven't had a problem with proximity to train tracks for my multi-units...maybe that's an issue if you are going to eventually resell an SFR to a traditional buyer but tenants don't care at all about an occasional train whistle...maybe that's because we don't get heavy train traffic in my area but that wouldn't be a deal breaker for me!

Dante Pirouz · Answer

I cross check every prospective property on Trulia's crime map...if it is anything but green I pass. It doesn't seem to matter if there is yellow or red across a major nearby street, all that matters is if the street where the property is located is green...it has proven to be the number one indicator for buying a drama free property!!

Emily Powell · Answer

I learned that one the hard way. :)

Mike Garza · Answer

Its always the numbers, from purchase price to cash flow, to renovation cost. Know what your numbers are today, not what you think it may or may not be.

What are your dealbreakers for buying investment properties?

What are your dealbreakers for buying investment properties?

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