Investment properties can be extremely lucrative when you select the right one the first time. However, falling into an investment trap can put an owner in complete financial ruin. That’s why it’s important to examine common investment property realities that can be avoided.
These 6 Types of Pitfalls are Most Common
Instead of worry about how you might fall prey to an investment property ruse, read the 6 types of common traps that new investment property owners fall into.
Call the bank first to see if the property is labeled as “risky.”
This is the oldest trick in the book. Before buying that investment property, call your bank to see if they have the property listed as “risky” on their end. Properties earn this title when they are older, are in need of repair, located in a poor spot, and other contributing factors that may take away from the charm you once saw.
Only spend what you can afford.
Finance 101 tells us this repeatedly: spend only what your wallet can allow. Don’t neglect other bills for a higher end property because it will pay for itself in the future. It may not; and if that is the case then you could ruin your credit and respected financial status.
Don’t fall for common rent schemes.
Rent schemes by sellers are numerous and targeted toward well-meaning individuals. Make sure you have met and verified the identity of the seller before sending them any money. Do not wire cash out of the country in particular. It would be a shame to spend your life’s earnings on someone who ran off with it.
Know what you are getting into: owning an investment property is tough work.
Maintaining a property is more than just playing house. It’s a HUGE responsibility. For example, snowy walkways need to be cleared by mid-morning, but what if you can’t find someone to provide snow removal services? Then you are out there shoveling the walkways on your own. It’s one of many tough realities.
Always have the property inspected before you buy.
Never buy a building as is without having it inspected first. There could be so many hidden financial pitfalls that will turn you away from wanting to take on a building.
Take on too much won’t help in the long run.
Spreading yourself too thin happens often when purchasing investment properties. The money can come very fast in most cases, so it is tempting to own as many properties as possible. Make sure you know your limits and are able to make alternative arrangements from there.
Final Thoughts and Considerations
Real estate lawyers like Adam Leitman Bailey P.C. can help to minimizing risk. If it seems that a deal might be too good to be true, advise the seller that you would like to discuss the terms with a licensed attorney first. This will either scare them away or profess their earnest intentions. Either way, you will know what you are getting into.