The 5 Worst Real Estate Investments You Can Make
Real estate investments can be a great way to make some BIG money but they can also be a fast way to lose your shirt. There are many things to consider if you are an investor including potential cash flow, monthly payments, resale value and property taxes. When determining what your next investment will be, consider these dangers to avoid.
Here are the 5 worst real estate investments you can make:
1. ZERO Rental Income Properties. These could be land or second homes that you purchase in the hope that they will increase in value over time. But remember that with these types of real estate investments even if the property does go up in value, you’re going to have to account for all the money that you could have earned if your money had been invested in a stock, bond, or a property that generated income.
2. Tenant-in-Common (TIC) Investments. These can be a very risky transaction because you do not own the piece of real estate yourself and instead pool your assets with other people. TICs do offer the advantage of being able to diversify your portfolio but can also rack up all types of fees associated with the agreement.
3. Timeshares and Intervals. Consider the large amount of money you need upfront, maintenance fees and the fact that when you try to resell the property the value generally drops between 50% to 80% from the moment you purchased it. These types of property investments can also be very difficult to sell.
4. Negative Cash Flow Property. If you really want to purchase an extravagant piece of real estate like a beach condo or fancy loft you probably won’t be seeing a dime of positive cash flow for at least 20 years. That’s not a good investment if you want to make the most of your money. A moderately priced property that generates income from the beginning is a better bet than prize properties.
5. Development Deals. Countless investors have taken a leap of faith on these types of deals and never saw their money again. Unless you are a highly experienced and extremely wealthy investor ready to take a chance – skip these. They require a long investment period with NO positive cash flow.