Real estate is one of the best ways to build wealth. But owning real estate can be a pain if you’re dealing with never-ending maintenance problems.
Even a property that’s new construction will have its own fair share of problems within a few years. Homeowners will spend between 1% to 4% of a home’s value every year on maintenance and repairs, and that percentage increases as the home ages.
That being said, how can you tell which real estate buys are worth investing in and which ones aren’t worth your time? You want to be on the lookout for warning signs.
What do I need to look out for when buying a house?
When you’re selling a property, you want the house to look as good as possible. You also don’t want to spend a lot of money making it look that way. That means you’re going to want to spend your budget on the floors, light fixtures, and paint.
Approximately two-thirds of homeowners plan on renovating their homes. When you’re buying a house, you want to be on the lookout for the problems hidden by any cosmetic fixes. Here are a few common warning signs that you shouldn’t invest in a property to avoid digging yourself into debt.
- Cracks along the outside of the home. Some exterior cracks could just be a sign that the house needs new siding. The three most popular siding materials include fiber cement, vinyl, and cedar. But exterior cracks could also be a sign that the house has foundation problems. Have a structural engineer inspect the property alongside a standard inspector.
- Missing shingles and other roofing problems. Roofing problems are a major warning sign not only because replacing a roof can be expensive but also because of the issues that come with a bad roof. Depending on the condition of the roofing materials, there’s the chance that the house could have water damage. Water damage leads to mold and structural problems. What’s more, depending on the season in which you inspect the home, it could be a while before the roof can be repaired. Winter is considered dangerous for roofers and more than 20,000 workplace slip and fall injuries were reported in 2015 in just the state of California.
- Uneven or bouncy flooring. Uneven or bouncy flooring can be a sign of many different problems including foundation issues, aggressive settling, mold, and water damage. Flooring issues are more common in older homes. Experts recommend bringing a marble to an open house to test the flooring in each room.
- Areas the seller won’t let you see. If a seller or real estate agent leads you right past a room or crawlspace without letting you see it, that’s a sign that they’re trying to avoid showing you that area. Some 24% of consumers are victims of identity fraud accidentally, but fraud in the real estate market can be equally subversive. Excuses to keep you out of certain parts of a house you’re about to buy? Not an honest sales tactic. Never sign a contract before you have the chance to see the entire house and have an inspector look it over.
Investing in real estate can be tricky. Investing in the wrong asset can quickly drain your finances instead of helping you build wealth. But by watching out for the warning signs above, you can reduce your risk of making a bad investment.
