Red Flags to Look Out For When Researching Grand Rapids Investment Properties

Mar 31, 2023 | Owner Education, Property Management Education

You’ve put together your investment goals, you’ve studied the market, and you’re ready to find something in your budget that will help you earn high rents and long-term ROI. There’s a lot of effort that goes into finding the right Grand Rapids investment property that you want to buy.

That’s great, but have you prepared for what you don’t want? 

Grand Rapids offers some great opportunities for investors to earn consistent rental income and impressive long-term returns. But, you have to buy a good investment property and successfully rent it out to responsible tenants. 

Choosing the right property is a requirement if you want to have a profitable and pleasant investment experience. 

We talk a lot about what you should look for when you’re investing in real estate

In today’s blog, we’re flipping the script a bit and we’re talking about what you shouldn’t look for. We’re checking out some of the red flags that might steer you away from a potential investment property. 

These are the most serious red flags you want to look for when you’re researching a potential Grand Rapids investment property. Consider them warning signs.

Undesirable Grand Rapids Rental Property Location 

Location is always important, whether you are buying a property or renting out a property. 

Tenants want a location that’s close to good schools, restaurants and grocery stores, and workplaces. 

They also want to feel safe. 

If the property is in a neighborhood where a lot of other homes are boarded up or there’s a lot of commercial or industrial activity, you’ll have a hard time finding great tenants. You should also be wary of any properties that aren’t close to public transportation and commuter routes. If a property is remote and there’s nothing around it for half an hour, just getting tenants out there to see it may be a challenge. 

Pay attention to location, and don’t make excuses for a bad location. If you’re looking at a great property at a reasonable price, it can be hard to say no. But, if the location doesn’t work for you and your prospective tenants, you’ll want to take a hard pass. Remember that good tenants want to rent good homes in desirable locations. Choosing a bad neighborhood would likely attract bad tenants. 

The Property Is Not Sound

You’re familiar with the phrase “good bones” when homes are being discussed, right? 

You’re looking for an investment property with those good bones. You want a solid foundation, strong walls, and a roof that doesn’t leak. 

A sound property is a smart investment. A property that has problems with the roof, electrical systems, or plumbing could be a financial disaster. 

We understand that the market is competitive and moving fast, but you never want to skip the property inspection. Instead, hire a professional inspector to look at the home and put together a complete report. You don’t want to see foundation cracks or a sloping property. There shouldn’t be any moisture underneath the house causing the foundation to sink. Will the basement flood? Is the ventilation iffy? These are red flags that you don’t want to deal with when you buy a rental property. 

Other potential issues include:

  • Outdated plumbing systems
  • Bad water pressure
  • Rusted water tanks
  • Outlets that spark

These are not cosmetic issues and they will be expensive to fix. If you turn on the water and it takes 20 minutes for it to get hot, you’re not investing in a good property. 

It Has Potential but It’s a Fixer Upper 

When the property clearly needs work, it’s tempting to take on the project. 

Especially since the price tag is probably pretty cheap. 

We know a lot of investors like to buy run-down properties and fix them up to make a profit. That’s a great investment strategy for some people. However, this isn’t exactly the market for flipping houses. And, if you’re buying an investment property that you plan to rent out for the long term, you’ll want to acquire a home that’s ready for the rental market. You can’t afford to spend months rehabbing a property. Not only will it require a financial investment, it will also delay your rental income. 

Avoid the fixer uppers, even if your design senses are kicking in. You don’t want to spend that kind of time and money on an investment property that won’t begin earning you any money for a long time. There are plenty of well-maintained homes on the market that simply need a fresh coat of paint and maybe some new appliances before they’re ready to rent. Focus on those. 

Occupied Grand Rapids Rental Properties 

Buying Occupied PropertyOften, buying an occupied property is a great investment. You already have tenants in place and rent coming in. 

At least, that’s what you expect. 

This can be a red flag, however, especially if you’re buying from another investor who seems eager to get rid of the property. You’ll need to spend some extra time doing due diligence to make sure it’s a wise choice. 

Don’t invest in a property that’s occupied by tenants who aren’t paying rent, don’t follow the lease agreement, and have no respect for their management company. Before you buy, take a look at how the property was operated over the last few years. Some financial red flags might be: 

  • Overdue utility bills
  • Late or unpaid rent
  • Unauthorized tenants showing up
  • Deferred or unreported maintenance. 

Stay away from those properties and be wary of any tenants with whom the former owner had major conflicts. They might not tell you this while you’re looking at the property, but reviewing the lease agreements and taking a look at the property while it’s occupied can tell you what you need to know. 

Red flags are often obvious to experienced Grand Rapids property managers. We can help you avoid these types of rental properties. We’re also available to help you understand how much rent you’re likely to earn which will help you have a successful investment experience. Contact us at Short South Management & Development when you’re looking for an investment property.