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Today we are talking about reasons not to buy a house.
Derek and I have looked at second investment properties over the last five years, and said no to all of them.
We always had to ask ourselves… why? What made us fold up our cards like a Shark Tank investor and proclaim, “I’m out?”
Disclaimer: Let me preface this with a big heaping scoop of “these aren’t dealbreakers for everybody.” You might have the risk tolerance to take on a property with these issues. To that I say, “awesome!” We are different, and that’s ok.
Here’s our list of reasons not to buy a house.
The number one reason not to buy a house is its location.
You can do a lot of things to a house – renovate top to bottom, convert a bedroom, cure lead paint, you name it – but the one thing that’s really hard to do is pick it up and move it.
Our favorite listing quip: “As is, where is.”
When you’re buying a house, you’re usually buying the land under it, too. Do you want property in that neighborhood? With those neighbors? I’m not talking about the people, I’m talking about the railroad tracks, the power plant, the local college watering hole, the busy freeway in your backyard….
To avoid heartbreak when you go see a property in person – use Google Maps to your advantage. Put little Google-man on the street and have him walk around. Take notes.
You have a bad feeling about it
Call it your spidey sense or your intuition… sometimes when you walk around a property, you just feel like you need a Scooby snack, amiright?
If your gut is telling you “no,” listen to your gut!!! You know not the reason why yet, but I guarantee that if you let Jiminiy Cricket help you out, your business decisions will fare better for it.
This goes hand in hand with #1. One of our top reasons not to buy a house is if it is in a flood zone.
Some people don’t mind this, but I 100% certainly do, to the point that I call it a dealbreaker. I will not look at a property in a flood zone. Nope, not even if it’s got the “1 in every 100 years” tag on it, like Derek’s first property. Water, once flooding, is *just a wee bit* hard to halt.
After witnessing a couple of hurricanes around the NYC area, I’m just not into it. Maybe your risk tolerance is different.
It’s out of your budget
If you deem a property to be too expensive for you, don’t do it! I hope by now you have calculated at least a ballpark budget for your house. Use that budget to your advantage!
You know if a property will be too much.
Trust me, you know. If you are up to your eyeballs in expenses, do what we did in D.A.R.E. in the ‘90s and “Just say no.”
As my wise mama likes to say, “There will always be another house.”
Big fix: foundation
We once looked at a 4-plex in a wonderful neighborhood, in our price range, not in a flood zone, with great rent potential that didn’t need too much work before renting out. We were so excited! … until….
… we got to the basement.
Its foundation was shot. And I mean… it was like hiking the Appalachian trail down there.
We perused the backyard to further discover that the property backed up to a small stream and some seriously soggy land. We deduced that even if we fixed the foundation, it would likely see trouble in the future. It was a no.
A foundation issue can be overcome! But for us, it usually isn’t worth it.
Big fix: mold
Yucky, gross, nasty mold. It’s bad news bears for a house. Why? It spreads. And the DIY approach is probably not in your best interests.
Our two family house actually had a few bits of mold when we purchased it – in the basement, it being summertime and the house being vacant, the old nasty basement bathroom had some moldy sheetrock, spreading to the framing. We didn’t consider it much of a big deal since we knew that entire bathroom would be hitting a dumpster, so we just ripped out the moldy parts and bleached the rest.
We also once looked at a lake house as a potential AirBnb. It was a HUD house at a good price, with huge potential if given some love. We called the listing realtor to ask about its condition – as we know firsthand that FHA 203k HUD houses are a big-ole-ton of work – and he said, “Eh, there’s a little mold.”
What if liars really did have their pants on fire?
The entire. Property. Was covered. In mold.
The kitchen, the bathrooms, up the walls in the basement – it was everywhere. The cost of correcting it was too much for our liking, so we walked. It was too bad – it was a really neat property.
Big fix: underground oil tanks
Hot topic here in old towns: underground oil tanks.
Family handyman has a great article here if you’d like to nerd out about underground oil tanks.
Back in the day, people thought it was an alright idea to put oil tanks in the ground.
That is, until they started leaking.
Oil in ground = not good. The EPA isn’t fond of that. And it’s the property owner’s financial responsibility to clean it up – all of it – no matter how far it has gone.
Let’s say you have an underground oil tank on your property that’s leaking into your yard, your neighbor’s yard, and downhill to the town park down the street. Big uh-oh. Fixing that could cost 6 figures, easily.
There are regulations about these being properly decommissioned if no longer in use. Sometimes they were filled with sand when people were finished using them. Some people actually still use them.
We bid on a property that had them still in use. Good ol’ Edna’s house, which was just gorgeous with unpainted pine trim, stained glass windows, a five minute walk from the train to Manhattan. I was in Heaven! Until… they mentioned the oil tanks. Two of them, since it was a two family house. UGH.
We bid low, and on the condition that the sellers would have the oil tanks removed. Someone else outbid us by $35k.
I hope for their sake that the oil tanks remain in good condition. My ego hopes that we walk by someday to see a giant hole in their yard removing them. (Hey, no one’s perfect). 😉
Too much work
My brilliant father, who knows houses so well that he has conversations with them, says it best:
“You can do anything to a house. Anything. The question becomes, ‘is it worth it?'”
Sure, you can fix up a property with brass fixtures and stainless appliances. If it’s in a terrible neighborhood, is it worth it?
You can gut a house, or tear it down and rebuild it, or stick a marble fountain in the front yard, but will you get a great ROI? It’s up to you to figure that out.
Right now, in our humble middle-class neighborhood, we’re seeing a lot of rentals and flips hit the market with granite countertops, flashy flooring, and modern looks. However, much of the neighborhood is still working class. There’s a fine line between an “updated kitchen” and an overdone renovation.
How much more in rental income will you make from a particular update? Or resale value?
Is it worth it?
Market’s too high
This is the reason we have currently stopped shopping altogether.
The market’s just a little crazy right now. No market – no market in history – has gone up and only up forever-and-ever-amen. It will adjust.
The real estate market is cyclical just like any other. Check out this neat article from Robert Reffkin at Masterclass explaining the real estate cycle.
Part of the power of real estate is its potential for appreciation. Buying in an all-time high market cuts into that potential.
I’m not talking about a poor neighborhood here. I’m talking about actual creatures living in a house.
If you’re interested in a rental property, it’s a really good idea to scope out current tenants – sometimes they come with the house. It may or may not be a project to get them to leave, depending on your state.
We once took notice of a HUD house listed in our town at a very attractive price. It was a five minute walk to a NYC train (location = check!) on a lovely block near a shopping district. We just had to go take a look.
We got into the house (without the realtor, by the way, who blew off our appointment and casually texted us the lockbox code). While walking about the dated kitchen boasting rolls in the floor, we just couldn’t shake the feeling that there was someone in the house.
A rustle here, a noise there… there was something else with a pulse.
Derek headed up to the second floor to get the lay of the land, when he heard the rustling again – louder this time. I neared the stairs when we heard a big crash – terrifying! – do you know how much Castle I used to watch?! – and Derek spun around and yelled, “GO!”
We ran outside, absolutely ran out the door to the opposite side of the street, and finally stopped to look back at the house.
The house had an occupant alright.
A rabid squirrel was launching himself over and over again into the front porch windows on the second floor.
…we didn’t bid on the house.
Mostly because it needed too much work.
Joke’s on us, though: the property hit the market as I write this post for double what it sold at in 2019. A friendly reminder of the power of real estate.
Alright, those are our reasons not to buy a house.
What about you– have you ever said no to a property? Why? What are your reasons not to buy a house?