Most investors will tell you that real estate can make you a lot of money. That’s assuming everything works out in your favor. You won’t make money on every real estate deal, but it’s often one of the safer investments, provided you know what you’re doing.

In this article, we’ll talk about when you should invest in real estate and when you should walk away from a deal. This should help if you’re getting into this niche.

Watch Out for Deals that Seem Too Good

You’ll always hear about considerations for avoiding dangerous professions. Some industries have inherent dangers, but in others, you must watch out for dishonest or shady characters who give that niche a bad name.

These dishonest operators certainly exist in the real estate industry. They can include realtors, land developers, contractors, and others. Even if you do not know much about real estate yet and are a relative neophyte, you can probably identify them without too much trouble.

These individuals will usually try some fast-talking tactics. Maybe you’re targeting a house that you’re going to hold onto as an investment. Perhaps it’s a poorly maintained building that you’re planning to fix up and flip by quickly putting it back on the market. Maybe you’re looking at a parcel of land you plan to hold as part of a real estate investment portfolio.

Whatever the case, if you’re talking to an individual who’s selling that property, beware if they seem desperate to unload it. If that’s how they strike you when you’re negotiating, that probably means there’s some reason why you should look at this deal more closely before you sign anything.

Often, a realtor or someone selling a property or parcel of land might know something bad about it, and that’s why they keep discounting it and trying to dump it on you. Do some additional research into not just the property but also the homes or businesses around it. You might come up with some reason why this person can’t wait to get rid of the house or land in question.

Flipping Homes Isn’t as Easy as You Might Think

Maybe you’re thinking about buying a property because you feel you can fix it up and flip it. That’s one of the main reasons why new real estate buyers get into the business.

Let’s say you raise the capital and you’re looking at some properties you might buy. Distressed properties may fit the bill. You might find one that’s very cheap. It’s in poor condition, but you feel confident you can turn it around.

Remember, though, that old houses often need more work than just a new coat of paint and replacing some fixtures. They often require major electrical and plumbing upgrades. Some need new roofs or replacement windows. At that point, you’re talking about tens of thousands of dollars.

Even if you can get a property you’re thinking about flipping for a rock-bottom price, walking away from that deal might make sense. At the very least, bring in a home inspector and have them do a thorough inspection before moving forward. The inspector can usually give you a ballpark estimate of how much money it might take to turn the property around and make it livable again.  

Acting as a Property’s Landlord Isn’t Much Fun

Maybe you’re also thinking about buying a property and then renting it out. You can potentially make money as a landlord, and some people get into this profession with big plans.

Keep in mind that if you buy a property, fix its issues, and then rent it out, you must either act as the landlord or else you must use a company as a go-between. If you elect to hire a property management company, they will take a large cut of your profits.

However, if you act as the property’s landlord, you must deal with burst pipes at three in the morning, rodent infestations, or any other problem the tenants have. When you think about these things, you may want to reconsider. You might walk away from a deal because acting as the landlord or giving a property management company a lot of your profits becomes an unsavory prospect.  

Some Properties Don’t Have Commercial or Residential Zoning

Maybe you’re looking at a property that you’ll buy either as a flip because you’re renting it out or because you’re holding it to see if the value rises. At some point, maybe you want to turn that property into a house people can live in or a business entity.

Before you sign anything, remember that only certain properties or land parcels have residential zoning, while others have commercial zoning. If that can potentially wreck your plans, you might have a piece of land that you’d like to turn into a house or a business, but you can’t do it.

You can always petition to turn the land from residential zoning to business or vice versa, but you won’t always get what you want in this regard. You might walk away from a deal if you find out the land or property you’re looking at has the wrong zoning designation.

Remember the Property Taxes You Must Pay

Finally, you should consider the property taxes you’ll have to pay if you buy a piece of property or a building. You have the cost of the property or land and the closing costs associated with it. 

You may budget for that, but you must also pay property taxes the longer you hold onto that property. It’s not like you just pay a set amount and then don’t pay anything else.

If you bought a house that you’re either flipping or renting out, you must also pay school taxes on it. Those can get expensive quickly.

Remember all these details if you’re looking at a real estate purchase. You might reconsider for these reasons if the deal no longer seems appealing.