5 Signs It’s Time to Walk Away from an Investment Property

Investing in real estate can be a life changing endeavor, but it is important to understand what you are getting yourself into and when to walk away from a deal. If it seems too good to be true, it probably is. Here are five red flags to look out for so you know when to walk away.

Above Your Budget

Real estate investing is serious business, so you have to treat it like a business. Know your budget so you understand what you can afford going into your real estate search. Stick to that budget, even if something great comes along.

Imagine you do make a purchase over your budget then an unexpected repair or legal issue arises. Would you have the resources to respond appropriately? If the answer is no, it is time to walk away.

Too Many Maintenance Issues

If you find a property is great but… it has a ton of maintenance issues, do a very detailed inspection and list out which issues are urgent, which can wait for later, and then look at what everything would cost to resolve.¬†If the urgent repairs would take you outside of your budget, like in the example above, it is time to walk away.

Some investors make an entire career on fixing up properties, but unless that is in your area of expertise and you are comfortable moving forward, follow your gut and look for a different property.

Poor Quality Tenant Pool

A great property in a bad area is no longer a great property in some cases. Look at the local area and tenant pool. Is the area up-and-coming with increasing rents, or economically depressed?

The economic conditions around the property influence people’s ability to pay. Also look into whether there have been police complaints and crimes at and around the property to know what you are getting yourself into.

Negative Cash Flow

Sometimes bad cash flow is a great opportunity to buy a property at a discount. Other times, it is a signal of something fundamentally wrong with the tenants, property managers, or the building itself.

Carefully examine the rent roll to see if clients are renewing, paying on time, and how long units sit empty. If you can explain a problem or identify a clear strategy to fix it, walk away and find something else to buy.

High Vacancies and Turnover

Speaking of vacancies and turnover, those can be a problem on their own even on a property generating positive cash flow. This could be related to the local area and tenant pool, or there could be something else going on.

Again, look at the rent roll, talk to the property manager or existing owner to see if you can find any clear issues. If you don’t see any problems and can’t explain why units are sitting empty and turning over quickly, it is a sign of a bigger problem, and a sign that you may be best off walking away.

Find the Right Agent for Investment Properties

Some real estate agents specialize in single family houses, others specialize in condos, others on investment properties, such as a certified Real Estate Investment Advisor.

Whatever your needs, find the right agent to help you meet your goals. If you don’t have an agent, start your search at AgentHarvest, where our pre-vetted and qualified agents are ready to get to work for you.

If you are buying or selling a house and are looking to hire a successful real estate agent to help you through the process, take a look at AgentHarvest's list of top-ranking local Realtors in your area. We found these agents by examining their sales track records, awards, rankings, client testimonials and by conducting personal interviews.

2 thoughts on “5 Signs It’s Time to Walk Away from an Investment Property

  1. I wish I had worked with, AgentHarvest, but did not.
    When you make a bad real estate investment, the impact is mental, physical and financial. Do not rush to buy and get all inspections possible. I made a life ruining real estate investment mistake and publishing this as a warning to others.
    I use to have a beautiful life and now run the likelyhood of loosing everything it took me 43 years of working to accumulate. Buyer beware, do not buy emotionally and walk away loosing earnest money if you suspect, as you stated in your article “if the deal is to good to be true, it probably is”.
    I had a panic attack so severe, I was rushed to a hospital and was admitted for 3 days for test’s and blood work. It was not a heart attack, this time, but it felt like one. Prior to my hospital stay I also tried to kill myseIf. Somehow my wife of 38 years is showing strength that I do not have. If my text does not get published, I understand.

    • Tony:
      I’m so sorry to hear about your purchase. Can you please share some additional information? What made it too good to be true? What ended up being the downfall? When it comes to investments, I’d rather have a bundle of smaller homes rather than one expensive home or apt complex. It spreads the risk, allows me to ramp up at a financially comfortable pace, gives me more options, covers more areas, and has more exit strategies. I’m so sorry you were taken. I’d be happy to offer some advice if I had more info. Thanks for sharing your warning to others. Now how can we help you get through this?

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