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This is a Bad Deal in Real Estate

Say it with me now, "Nothing happens in business until you make a sale!"

Speaking for myself, I can spend all day knocking doors, cold calling sellers, working through lists, or making connections, but I don’t provide for my wife and kids until I have a property under contract and with tenants.

You already know some of the most ideal situations for creative financing, but what keeps an investment from being ideal?

You might be thinking that it starts with you:

  • What if you have bad credit?

  • You can’t find any comparable deals in the market.

  • You’ve had a bad experience with real estate agents before.

If you’re doing it my way, you’re not the problem. Creative financing gets you out of those situations.

So Pace, what exactly makes a bad deal?

I would say there are three main things that classify a bad investment. They are homes in:

  1. High crime areas

  2. High vacancy areas

  3. Areas of low rent

Why are these places so hard to invest in? Well, let's look at each of them.

Homes in high crime areas….

Are hard to get renters into. For obvious reasons, most people don’t want to live in areas of high crime. They turn renters off and keep them away.

Whether they be renting through VRBO, Airbnb or on a monthly basis, if your renters don’t feel safe, they won’t stay and won’t come back in the future.

Homes in high vacancy areas…

Are usually vacant for a reason. Are those properties near power lines or railroad tracks? Are they near freeways? Or is the neighborhood a failed renewal project?

Or what are they not close to? Are there no grocery stores or gas stations close by? Is it too far away from the local schools? How far away from doctors’ offices or hospitals are they?

If a neighborhood has a high number of vacancies, there’s a reason. Don’t be a part of the reason.

Homes in areas of low rent…

Don’t generate income. You might be able to get a house under contract in one of these places, but can you make your money back? The buck stops at a home that makes you lose money.

And that’s what it all comes down to: cash flow, cash flow, cash flow.

Can a property you’re looking at investing in be something that puts money in your bank account? Or are you going to invest time and money into a house that doesn’t give you a return?

If money’s not coming in, you’re not helping anybody – including yourself. Homes in these areas are a dime a dozen and sometimes you even find properties that fall into multiple categories. So how do you know if what you’re looking at is a good deal?

Do your comps!

Comparing your prospective property to similar properties in the same neighborhood will give you insight into if it’s a dime or a dud.

Comping can be a challenge, don't get me wrong, but it's also a valuable asset in making sure you know what's around in your target market.

Now, you can go around searching on Google on how to comp or you can join the best real estate investing community ever.


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