Investment Red Flags
Critical warning signs that indicate bad real estate deals. Learn to spot these red flags before they cost you money.
Critical Warning Signs
Learn to identify the warning signs that separate profitable investments from costly disasters. These red flags have destroyed countless real estate deals.
Financial Red Flags
Cash-on-Cash Return < 6%
Insufficient returns for investment risk
Negative Cash Flow Projections
Property loses money from day one
DSCR Below 1.20
Insufficient income to cover debt
Break-Even Ratio > 85%
No safety margin for problems
GRM 20%+ Above Market
Severely overpriced property
Unrealistic Appreciation Assumptions
Banking on unsustainable growth
Market Red Flags
Declining Population
Shrinking tenant demand
Major Employer Exodus
Economic instability ahead
Rising Crime Rates
Neighborhood deterioration
High Vacancy Rates
Market oversupply issues
Rent Control Implementation
Future income limitations
Zoning Changes
Regulatory risks ahead
Property Red Flags
Major Structural Issues
Foundation, roof, or system problems
Environmental Hazards
Asbestos, lead, mold contamination
Zoning Violations
Illegal use or modifications
Deferred Maintenance
Years of neglect requiring major capital
Title Issues
Liens, easements, or ownership disputes
Insurance Problems
Uninsurable or extremely high premiums
Deal Structure Red Flags
Seller Financing with Poor Terms
High rates or balloon payments
No Due Diligence Period
Pressure to close without inspection
Rent Roll Discrepancies
Inflated or fictional rental income
Excessive Seller Concessions
Hidden problems requiring compensation
Multiple Price Reductions
Market rejection of asking price
Rushed Timeline
Insufficient time for proper analysis
Quick Red Flag Checklist
❌ Immediate Deal Killers
- • Negative cash flow from day 1
- • Major structural or environmental issues
- • Title problems or legal disputes
- • Declining neighborhood fundamentals
- • Seller refuses proper due diligence
⚠️ Proceed with Extreme Caution
- • Returns below market benchmarks
- • High vacancy or turnover rates
- • Excessive deferred maintenance
- • Zoning or regulatory risks
- • Unrealistic seller expectations
Avoid These Red Flags
Use our investment calculator to systematically analyze deals and identify red flags before they cost you money.
Analyze Deals Safely