June 28, 2012 · 2 Comments
Real estate investors must be on the watch for these 3 pitfalls on the rise or see their stint in real estate investing cut short.
It only takes a few bad buys to bankrupt a real estate investor and those not up to date on their real estate education have found the following crippling their finances far more frequently that you might think…
1. Meth Labs
Meth labs pose a major threat to real estate investing. Investors don’t just need to worry about purchasing rentals with active cook operations or having new tenants set them up, buying a former meth lab can mean having to tear the home down and build from scratch of in some cases major liability if end buyers or tenants are effected. There are telltale signs including smells, stains and paraphernalia, though even houses which have housed meth smokers can be deemed too toxic to be safe. If you suspect a potential acquisition could have been a meth house get it tested.
A combination of defaults, rising values and convoluted laws make condos risky real estate investing acquisitions in some parts of the country. Savvy investors who can gain control of associations by acquiring the dominant voting right can dissolve them and even sell off units from under current owners and mortgage lenders, sticking smaller investors without a property and still owing the debt.
3. Local Governments
Local governments are still in panic mode, sometimes leading them to make what seem like crazy decisions which are negatively impacting or even destroying entire neighborhoods. Some are contemplating letting homes burn to reduce inventory, others are shutting off services and utilities and reduced policing has resulted in at least one Nevada law enforcement department to put up banners announcing they can no longer protect citizens. While these areas may offer incredibly cheap real estate investing ‘deals’, this could make trying to resell them anytime soon a major nightmare. Be careful where you buy.