I’m a Real Estate Investor: 9 Red Flags You Should Look For Before Buying Property

Investing in anything, including real estate, involves taking a risk. When it goes well, you could see some potentially high returns on your investment . When it doesn’t, you could break even or end up losing money.

While there’s always going to be a learning curve and an acceptable level of risk involved, it’s important to do your due diligence before investing your money. With real estate in particular, there are several red flags you should look for before buying property.

These are the big ones, according to real estate experts Martin Orefice, CEO of Rent to Own Labs and Kateryna Odarchenko, licensed real estate agent with Long & Foster Real Estate .

Also here are tips on how to get into real estate investing with under $50,000 .

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Property Has Been Sold Multiple Times

It’s one thing for an existing property to have had multiple owners over a long period of time. It’s another if that property has been purchased and sold multiple times in quick succession.

“This is a clear sign that a property hasn’t worked out for other investors,” Orefice said. “Sure, it could work out for you, but you’ll want to use caution and investigate before proceeding.”

It’s in an Up-and-Coming Area

Up-and-coming areas can be both good and bad. On the one hand, they’re a sign that the area is growing and that demand for rental properties is bound to increase in the near future. It could also be a sign that property values will rise as infrastructure develops and the economy improves.

But there are a few red flags here, too.

“Promises of future developments, such as new roads or large-scale infrastructure projects, can sometimes be overly optimistic,” Odarchenko said.

She said to verify any plans like these thoroughly before you buy. If anything seems unrealistic or if there have been issues with similar planned projects before, you might want to steer clear.

Neighborhood Is on the Decline

Similarly, if the area you’re interested in purchasing property has experienced a recent or current economic downturn, you’ll want to proceed with caution or look elsewhere.

“Avoid areas with declining economic conditions or high unemployment rates,” Odarchenko said. “These factors can negatively impact property values and rental demand.”

Even if you don’t plan to rent out your property and want to sell it for a profit, you’ll still face similar issues if the local economy isn’t doing well.

Crime Rate Is High

Both buyers and renters are going to be looking at the local crime rate when deciding whether to move to a new area or neighborhood. If you find a property that seems perfect but the crime is high — and especially if it’s rising — this is a major red flag.

“An increasing crime rate in the area can significantly affect the desirability and safety of your investment,” Odarchenko said. Purchasing property in this kind of area could mean lower property values, higher vacancy rates and less money in your pocket.

Cost of Overall Upkeep Is High

“Properties with high maintenance or service charges can reduce your overall return on investment,” Odarchenko said. “Always factor in these costs when evaluating a property.”

Remember, buying property isn’t just about the upfront costs. There’s a lot of upkeep involved, too, especially with rental properties and fixer-uppers. Weigh the costs and potential returns before making any major decisions.

Property Type Isn’t Performing Well

Not all properties see the same return on investment. One particular option to avoid is office space.

“Right now, office properties simply aren’t a good investment,” Orefice said. “The fallout from the rise of remote work is still in progress and any office property should ultimately be evaluated as a redevelopment opportunity rather than a turnkey property.”

It’s Got an Experimental Layout

Similarly, not all property layouts are going to sell as well as others.

“Non-standard or experimental property layouts can be a turn-off for potential renters or future buyers,” Odarchenko said. If you want to increase your chances of getting a high return on your investment, she said to stick with traditional or more widely accepted designs instead.

There Are Clear Code Violations

If you want to purchase a cheap old house and fix it up, that’s great. But watch out for code violations.

“Buildings that need some work can be great deals, but multiple code violations could hint at more serious work that needs to be done,” Orefice said.

Price Is Just Too High

Part of making sure you make a profit is choosing a property that’s at the right price point. If it seems exorbitant, you could be putting in most of your capital just to buy it — without any guaranteed returns.

More importantly, verify that the property isn’t priced significantly higher than neighboring properties of similar size, condition and type.

“Ensure that the property price is reasonable compared to similar properties in the area,” Odarchenko said.

If you’re not sure where to start, check sites like Zillow to see what other homes in the area are listed at. You can also use these platforms as a starting point to see the condition, age and history of different properties.

Tips For Buying the Right Investment Property

If you’re just getting started in real estate investing, here’s what Odarchenko said to do:

• Look for properties that can be used as long-term rentals in stable or growing markets.
• Avoid investing in more volatile areas or where there’s notable decline in property values.
• Do your research into vacancy rates, crime rates, future development projects and current market and economic conditions.
• Learn from other real estate professionals — like agents and even property managers — before making any decisions.
• Diversify your investment portfolio to mitigate risk and increase your potential returns.

Doing these things won’t guarantee returns, but it can help you avoid some of the more common pitfalls in real estate investing.

This article originally appeared on GOBankingRates.com : I’m a Real Estate Investor: 9 Red Flags You Should Look For Before Buying Property