The "Warning Signs" That Shouldn't Stop You From Investing In Real Estate

Tuesday, July 14, 2020

Whether you want to flip a building for a profit or move into your dream home, buying real estate is an accessible option. As a homeowner, you can leverage your existing property to obtain a second mortgage or sell up for a profit and invest it into another home. Although it’s scary, part of the process is taking your starter house and growing it into something bigger and better.

Of course, novices have a lack of experience to worry about when they bid on properties. Just because you live in a house doesn’t mean you’re an expert in real estate, quite the opposite. As such, it’s tempting to invest in the common “warning signs” you hear so much about and not the building itself.

There’s no doubt that you need to be savvy when buying property. Without due diligence and thorough research, you could end up with a dud and effectively waste your inheritance or nest egg. Still, if a property has issues, it’s not the end of the world. To show you why here are the pretty simple solutions to six of the greatest problems that buyers face.

Carry on reading to learn more about how you can potentially slash the asking price and land a bargain.

Owner History

Checking the owner history of a property is similar to glancing at a person’s resume and asking why they’ve left numerous jobs after less than a year. It’s a question that requires an answer since it indicates that there could be a problem. After all, why have so many separate owners decided to pass the buck? What do they know that you don’t know?

Quite simply, it could be nothing. This is because the owner history might not be as toxic as it seems at first viewing. The key is to analyze how long people have owned the building before selling. If it’s more than three years every time, this shows that there probably aren’t any underlying issues.

While the average ownership of a house in the US is nine years, most investors will attempt to offload parts of their portfolio much sooner. Otherwise, there’s a good chance that the value will drop and they’ll miss out on turning a profit.

Plus, you can always hire unbiased professionals to provide you with the big picture. For instance, a building surveyor who doesn’t work for or with the bank or seller will highlight any areas of concern, from potential subsidence to historical water damage.

Water Damage

It’s worth pointing out that water damage is one of the hardest warning signs to solve since you can’t stop Mother Nature from doing her thing. With global warming on the rise, adverse weather conditions are more frequent than ever during seasons you wouldn’t expect. Some southern states experience the average annual 767mm of precipitation in a couple of weeks.

If the property is in a high-risk flood zone, you might want to think twice, especially if you live in a flat region where the flood water will build up. However, if water damage is more to do with moisture and mold, there are options as they usually disappear with increased ventilation. Don’t assume you can paint over mold as the gloss only traps the moisture and makes it worse.

Instead, scrape it off and open nearby windows and doors to enhance the air supply to the room. Alternatively, you can purchase dehumidifiers to purify the air and remove excess water. Probably the best tactic is to check whether the walls close to the exit points are made from drywall.

Typically, sheetrock is soft and soaks up moisture very easily. Therefore, it’s better to rip it out and replace it with a less malleable material that won’t absorb the water. A mixture of sand and mud is effective, particularly as you can paint over it with ease.

Internal & External Cracks

When you see cracks, your mind will instantly assume there is subsidence. The effect is so powerful that you can start to see tilts and leans where there are none. People do it for a straightforward reason - subsidence is a major deal. If you purchase a property with bad foundations, it could cost you up to $50,000, depending on the house's size.

The good news is that subsidence doesn’t strike fear into the hearts of homeowners today as it used to because the treatments are affordable and accessible. To begin with, if the cracks are on the inside, there’s a serious chance that it has nothing to do with unhealthy foundations and more to do with the fact that the plaster has expanded.

Externally is where the warning signs are problematic, yet the solution could be simpler than you imagine. You might not be aware of this, but eliminating subsidence is as easy as digging trees in your garden as the roots grow under the property and cause it to tilt. Or, you can remove drains and pipes and underpin the foundations to make them stronger.

For those wondering why you’d bother with the hassle in the first place, buying a property with a history of subsidence issues is 20% cheaper. As long as the fix is on the affordable side, you could save yourself a small fortune and upgrade your lifestyle.


Electrical rewriting is a big job as it takes almost two weeks and costs as much as $10,000. Again, the question is, “why would you bother?” when you can bid on a property that has great wiring. Again, the answer is that you can save a significant sum if you’re willing to negotiate hard.

It’s all about haggling with the seller to encourage them to take a considerable chunk off the asking price. If you can negotiate effectively, it’s not rare for sellers to reduce the value of their home by more than $10,000, and that’s the high end of an electrical repair project. Even updated old and outdated systems shouldn’t cost this amount.

Of course, you’ll need to play hardball, which means sticking with your position for the long-haul. A listed property might have problems, yet the owner won’t give up on their profits easily. With that in mind, an excellent technique is to focus on an expense that has the potential to cost more, such as closing costs.

Closing costs are eligible to be paid by the buyer or seller and reach anywhere up to 5% of the house’s value. Once the seller gets the feeling that you won’t buy unless they cough up for this fee, they’ll be inclined to knock off a couple of grand for electrical work.

No Permits

Obtaining permits for building work is a gray area. On the one hand, you’d prefer to have evidence that everything was done correctly so that it doesn’t bite you down the line. On the other hand, you understand as a property owner that not every project requires rubber stamping. You can tell rather easily whether they have done a quality job.

For those who can’t secure the relevant certification, the next step is to consider whether the project is something that needs certifying. For example, major structural work, such as removing a load-bearing beam and moving it elsewhere, should come with a permit. However, a bathroom remodel isn’t a big deal.

Firstly, you can ask your structural engineer or surveyor to gauge the quality of the renovation. If they give it their seal of approval, you can be confident that there isn’t a problem. Also, you can research the reputation of the construction company they hired.

Cowboy builders can’t be trusted, yet it’s easy to put your faith in a reputable business with stellar, five-star reviews as their standing in the industry is proof that they don’t cut corners. If you’re in doubt, you can talk to the local authority and ask them for help.

Areas The Seller Won’t Show

It’s not uncommon for a seller to try and pull the wool over your eyes during a house viewing or inspection. Usually, they’ll say that you can’t see a part of the house because it’s unsafe or not worth your time. This should set alarm bells ringing as they’re actively attempting to hide their home’s least favorable areas.

Thankfully, the solution is simple - tell your realtor. If he or she wasn’t present, you should arrange a second viewing with them in tow, and they’ll gladly unlock any closed doors. It’s worth a second attempt because sellers can get jittery about all sorts of things, yet they might not be of concern.

In this case, you can use it as leverage to reduce the house cost while proceeding with the sale. Of course, if the listing agent is also suspicious, the best option is to wipe your hands of the property and move on to another.


You should always take note of the warning signs that make you nervous. However, it’s essential to understand that they aren’t as significant as they might initially appear. If the solution is easy and affordable, the “problems” could save you a lot of money as they’ll reduce the asking price.

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