The Top Reasons To Walk Away From A Potential Rental Property!
Today we are going to talk about are the top reasons to walk away when purchasing a rental property. As an investor, I have purchased several properties. Some were mistakes that I should have walked away from and others were good deals. So let's take a look at the things that I have learned.
The first thing is: Does it fit your business model? A lot of investors that I talk to do not have any kind of business model. And if you don’t have a business model, you need to get one, first of all. You need to have a goal as to what type of properties you want. You need to write it down, you need to stick to those goals, and you need to always refer back to them.
When you are looking at a deal you always want to ask yourself: "Does this property fit what my goals are?" And if it doesn’t, walk away from it. Do not become emotionally attached, if it doesn’t make sense do not move forward. Do not buy a deal just because you like the area or just a small portion of the property. Always make your decision based on numbers not emotions. Look for reasons that you should walk away, and if there isn't one you're good to go!
We also need to keep in mind that you should never buy a property assuming that nothing will go wrong. Something will ALWAYS go wrong, so be sure to have a contingency plan. Even if it is a brand new house, have a back up plan. Obviously, the older the home the higher the potential for maintenance costs and the potential for things to break.
Also, lower income properties are probably going to have a higher tenant turnover. With that, you are going to have higher management fees, higher costs for getting the property rent ready, and other things like that.
What if the area does not fit your business model? For example, let’s say it is a declining neighborhood or the area has a high crime rate. Those are all things that you want to make sure don’t fit what your business model is. Keep in mind that the types of properties you WANT may not be a property you want to go for.
And lastly, pay attention if the information doesn’t add up. If for some reason you were told something and you found out otherwise through your own due diligence, maybe they are not disclosing all the information. If the numbers don’t add up, you may want to look into walking away.
Keep these things in mind, and don't be afraid to walk away if you feel that you should!