3 “Show Stoppers” That Keep Me From Going Through With Rental Purchases

by | BiggerPockets.com

I was speaking to a fellow investor friend of mine today and he asked: “What are your show stoppers for rental purchases?”

What he was referring to were those things on a property that will kill the deal when it’s already under agreement. We had an interesting discussion on it, and I found that his list and other investors’ lists of deal killers were very different.

What Keeps Me From Going Through With a Deal?

In today’s video, I talk about my deal killers and review other investors’ items. You’ll have to watch the video to hear them all, but here’s one: I will do a deal with lead-based paint. Some investors run for the hills if they see lead-based paint in a property or hear that the building was built before 1976—the year it was banned in the United States. I have found that I can work around lead-based paint by properly treating it once we purchase the building and notifying our tenants of the risks when they move in. I’ve also found that my insurance company will cover us for claims of lead poisoning, so we are covered there. It comes down to risk tolerance.

Related: 3 Ways to Make a Stellar Real Estate Deal Out of an Average Deal

My “show stoppers” all have to do with things I can’t change. I can remove a bad tenant, I can repair issues with the property condition, and I can work around hazards like lead-based paint. I can’t change other factors of the property, and those are my show stoppers. Watch the video with this article to learn what they are!

If you have some show stoppers of your own, please leave them in the comments section of this article.

Have a great and profitable week!

About Author

Matt Faircloth

In 2005, Matt founded The DeRosa Group along with his wife, Elizabeth. At the time, the two person company owned and managed two assets – a single family home and a duplex. Over the last nine years, they have grown the company to a 12 person team owning and managing over five million dollars in residential and commercial assets throughout the central NJ and Philadelphia area. One of DeRosa’s mantras is “to make money while making a difference.”

14 Comments

  1. Antonio Coleman

    Matt..one of show stoppers I must say that will turn me off is learning about the history of the foundation. Sometimes things come up after the fact and if the foundation becomes an issue then it’s not worth being a rented property due to all the expenses.

  2. Ryan McCleary

    What about legal non-conforming uses? Multifamily unit that was legally built but due to more recently passed zoning laws the lot is now zoned something different (e.g., single family residential). Units on such a property cannot be expanded or rebuilt. I understand that there is insurance to cover some of this risk. Does this fall under your zoning show-stopper?

    • Naren Gunasekera

      When you say rebuilt, do you mean in the case of a fire or natural disaster? If the structure was built before the zoning law was past, that use/structure should be ‘grandfathered’ in unless it is specifically prohibited by zoning. So it usually can be rebuilt in case of a fire, etc.

      • Adam Moore

        In my city, there are provisions for non-conforming uses that have been substantially damaged that COULD prevent the structure to be rebuilt. Make sure you read the zoning code for YOUR city, but I don’t think it’s uncommon for municipalities to require approval from a Zoning Appeals Board before rebuilding substantially damaged non-conforming uses/structures. A structure is deemed substantially damaged (usually) when the repair costs exceed 50% of the fair market value.

        • Matt Faircloth

          It does depend on your area. I New Jersey, as long as you rebuild within a reasonable time frame (6 to 12 months) you can do it even if it’s non conforming to the current zone. You have to replace the structure that was there and have to use the same footprint as the prior building.

  3. Chris T.

    Thank you for sharing Matt.

    What about flood zones or low lying areas?

    Some investors have bought them for the right numbers (with flood insurance included). Even with the right numbers, I feel that flood zones limit exit strategies and resale values. Not to mention the damage from potential floods, even with insurance coverage.

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