Twelve Types of Investment Property You Should Always Avoid In Your Investing Activity

While there is a huge number of precautions, rules, and pieces of advice that you shall follow when working in the market of real estate investment (and we wrote already about so many in our previous blog posts), there are certain no-no’s, which you definitely should stay away from. We’re concisely listing below 12 kinds of property, which you don’t even have to consider if you’re a wise investor and a wise person.

1. Bad location

Any real estate is a bad investment if it’s located in an area or neighborhood, which is bad. It could be bad for various reasons: high crime rate, inhabited by junkies or poor anti-social underclass, with underdeveloped or dilapidating infrastructure, high general vacancy rate, old buildings with wet walls, close to loud airports, factories, railways, or the area suffers frequently from natural disasters (or hasn’t restored yet after the last major one). Is it possible to come up with a picture of poorer bad investments examples than a bad location? Currently, it’s the most powerful no-no.

2. Located in a one-industry town

Simply think, what happens when a city-forming enterprise stops functioning? Everyone leaves it so it’ll resemble a haunted house – empty, dark, and scary. Even though Earth’s population is growing, for many and many towns, it is a matter of “when”, not “if”.

3. An object being a long time on the market

If an offer hasn’t been swept yet off the market as a great offer & stays on it for too long, obviously, it is something wrong with it. What, for instance? Unreliability of a seller, hidden problems (and the owner wouldn’t let inspectors in), constructive problems (leading to wall cracks or whatever), too high price without a reason, legal problems of this object (arrested, disputed, etc.)… The list can be country-specific and state-specific.

4. Extremely neglected/dilapidating object

Independently of the reason for the neglect, an object, which has multiple issues of its condition, might (or, more surely, will) require large expenses for its repairs now and loads of money to maintain it in a good state in the future. Some problems may be so serious that even a very good monthly cash inflow could not be able to cover the expenses for repairs, which will drain your pocket on and on.

5. A property bought just for appreciation, no rental income

While it is generally known that real estate in the US is appreciating over time very significantly (the same as in many other countries), you should carefully do your due diligence before buying some object that would simply stand and wait until prices go up. There are a lot of connected issues with such a purchase, which might prevent your property from growing up in the price at all, like annual taxes, ever-increasing degree of decrepitude, stagnating market or the area…

6. Negative cash flow objects

There are some objects, which only generate cash inflow periodically – like ones by the sea in the summer months. Or vacation rentals, which show a high percentage of vacancy rate throughout the year. These objects will take money from you on the annual basis, not add. And they are hard to sell profitably.

7. Overly luxurious objects

While many of us nurture the idea of renting some luxurious place to stay there for vacation or for holidays, most of us eventually don’t land on it. Even if such a property is super fine and gorgeous per se, it might stay vacant for the most time because of the silly high price tag. The same as the previous, it is a negative cash flow object. Eventually, you’re lowering the price tag or selling it for good with a hefty discount.

8. Objects too costly for you

There are some very fine objects, which generate a lucrative income. But if they’re just too costly for you, you don’t want them. Otherwise, after the first major disruption in cash flows, you could end up giving away your property to the bank, which lend you the money for the purchase, to cover your super costly investment.

9. Airbnb objects with bad Airbnb legislation

An increasingly bigger number of states, cities, and territories in cities across the globe forbid Airbnb and similar services to operate in them. The reasons are lying on the surface: loud parties, vomiting drunkards around, growing crime rate, and pulled-up prices for regular housing in the area. And you don’t want to be impacted by such restrictions.

10. Tenant-in-common

This is a notion when you pair up with someone or several investors to buy a single property object. While pooling might seem a good idea at first, most of such business ideas crack up because of the reluctance of parties to fulfill their obligations, desire to take more money, quarreling with one another, and persisting on selling shares of others in the object for an unfair price. A golden rule of life and business is applied here: wanna do something good? Then do it yourself.

11. Time-sharing objects

In these objects, you only own a certain time when you can live there or let them for rent. Let’s say, from 5th of May to 11th of June. The rest of the time belongs to other holders. These are not good for renting at all and are very hard to sell for a normal price.

12. Real estate development

Unless you operate tens of millions of dollars and have 10+ years of hands-on everyday experience in developing new objects from ground to commissioning, you don’t want to get into any of these undertakings. These are only great real estate investments for large companies and wealthy persons, like, owners of private equity funds, who improve their wealth via development activities.