A Guide for Beginner Real Estate Investors: Which Investment Properties to Avoid
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Real Estate is a fantastic investment, with many opportunities for growth and appreciation. But there are also risks involved. So it’s important to review your strategy and ask yourself if you’re ready to lose money by investing in real Estate.
Some investments, such as investment properties for sale, are high risk. If you decide against them, you should have a great deal of cash before investing. The price of real estate investments does not reveal some risks. Also, don’t buy any investment property where the return is too good to be true!
All real estate investors should have a strategy. And they should keep asking themselves if they need to make any changes. The more careful and thoughtful you are, the more likely you will avoid some pitfalls and errors. But first, here are some mistakes that even experienced investors can make.
1. Condominiums
Condos are high risk for investors for a few reasons. First, there’s no way to do any independent inspection of the building or systems inside before you buy. You’re taking the seller’s word that everything is in working order. And you’re also betting that nothing will go wrong with the building or inside systems.
A condo might be a bad investment if you’re not the kind of person who can live with constant anxiety. If the building is managed badly, it will affect everyone’s quality of life. However, this may not be a good fit if you don’t have enough income to handle the common expenses.
And speaking of low income, condo associations are notorious for being money pits for owners. You could end up paying for many things you didn’t bargain for when you bought your condo. And the maintenance issues will be more neglected by owners who want to go on with their daily lives.
2. Commercial Real Estate Investments
Both offices and retail locations are high-risk investments. These real estate investments don’t have high returns and require you to maintain a lot of cash to afford the expenses. Commercial buildings can also be very expensive to maintain, and you own a large property, so you’re responsible for everything from utilities to security to cleaning and repair.
3. Multi-Unit Properties
Like offices and retail locations, multi-unit buildings don’t have great returns and require a lot of cash to afford the expenses. You’re also responsible for maintaining a large property, so make sure you can afford to handle it before you buy! Multi-unit properties rarely have a good appreciation as well.
4. Properties in a Bad Neighborhood
The value of your investment property will go down if you buy in a bad neighborhood. You could end up stuck in an undesirable location with a bad reputation. If you’re unable to handle the pressure, maybe this isn’t for you.
5. Real Estate Investments in a Bad Economy
The value of your property will go down when everyone is still struggling to find work and their income is low. Depressing and low-income conditions are also high-risk conditions that can be dangerous to your investment.
6. Overpriced Properties
Investors who buy a property at a “normal” price and sell it at an inflated price when the economy increases are often referred to as a “smart buy.” That’s because if you can sell at that price, you’ll get the extra value which is the difference between where your property starts and where it ends up when your market goes up. But that extra value can be very dangerous for investors who buy too high and don’t have enough cash to cover the extra cost.
7. Low Yield Properties
Low yield properties aren’t easy to get rid of, and they may not be worth the time and money investment. If you’re trying to hold on to your property, it will be a lot of work and might not be equivalent to the money you put into it. Time is money, in this instance.
The Bottom Line
These were some of the worst investments you could make. You may be able to choose to invest in one or more of these. But you might be better off with a lower-risk or different investment. However, if you go ahead with any of these investments, you will want to re-examine your strategy as soon as possible. You always have to plan your strategy carefully.
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