Investing in residential property is popular for a number of reasons. It's often a great way for novice investors to get started when building a real estate portfolio and lease negotiations with renters aren't nearly as complicated as the kind that comes with commercial property.
However, most residential property investors quickly learn that those "bargain" properties they see up for sale due to foreclosure or pre-foreclosure can be anything but an actual bargain.
Take some friendly advice from someone who has been there before you: If you see any of the following major red flags during your pre-purchase inspection, walk away from the deal -- fast.
Major plumbing trouble
You want to do a check of both the plumbing inside the house and the plumbing heading to the city sewer line. Plumbing problems tend to be major money pits because they can require tearing out whole walls and digging out yards in order to fix them. You won't easily recoup that kind of expense.
Most older houses need a new electrical box or some minor updates to the outlets -- don't let those scare you. If there are unexplained flickering lights and the power seems to constantly be going out, however, it's time to look elsewhere for an investment.
A damaged foundation
This is an absolute deal-breaker unless you plan on totally doing a teardown and rebuilding. A damaged foundation is not easy to repair; it has to be rebuilt in order to be fixed.
A bad roof
This might not totally kill your deal -- as long as the cost of the new roof is figured into the price. Unless a roof has a good 10 years left on it, many investors recommend that you walk away (or plan on replacing it soon).
If you're considering a real estate deal -- the No. 1 rule is to ask plenty of questions and think about the potential future costs. Our office may be able to help you spot potential issues with a deal, and you can learn more from exploring our site.