Watch for Red Flags Before Buying a House in a Negative

Watch for red flags when purchasing a property in an undesirable location.

Granted, you will often get a better price for a house located next to a negative feature. I'm talking about negative features such as, a halfway house for criminals, a low-income housing complex, a trailer park, a prison, or a busy road. These things are not intrinsically "bad" but, at best they will lower the value and appeal of your property.

A Small Pool for the 600 Pound Gorilla

For example, the location of a house across the street from a halfway house is going to considerably limit what you can do with Flag the house. Regardless of whether you are going to turn it into a rental or flip it, you have a very limited pool of potential tenants or purchasers. In my opinion, most people would not want to live there.

Consider if a tenant had a choice to rent your property, or one in another neighborhood nearby that did not have a trailer park across the street. Which would they choose? You may not see the 600-pound gorilla in the room, but everyone else will.

Of course, the purchase price is low. However, in my opinion, it's better to spend a little more money for a house that doesn't have a glaring negative feature.

How I Stepped on a Banana Peel on my First Purchase

The first rental property that I purchased in 2002 met the exact requirements for purchasing a property next to a negative feature. The property was located in a nice neighborhood, but right behind my property was a semi-rundown apartment complex (see, Addams Family house).

I didn't think it would matter at the time, but it did. I was never able to get any good tenants into that house, and it was a constant effort keeping an eye on the property. Eventually, I cut my losses and sold the property.

I had to learn the hard way, but I won't make that mistake again.