Your Guide to Personal & Financial Freedom Through Real Estate

How To Identify A Money Pit In Under 5 Minutes

It’s A Great Deal... Or Is It? 

The price is right, you can get financing, and it’s in a great part of town.

So why is it still on the market?

When you know what you’re looking for it’s easy to spot the red flags indicating that a property is most likely going to be nothing more than a money pit. And when you see said red flags, walk out the front door and don’t ever look back.

 First And Foremost, Look For Structural Issues

a crack in a concrete building foundation

Take a walk around the outside of the house and look for exterior foundation cracks. If the house is brick or stone, look for stress cracks, not only in the foundation, but anywhere along the exterior of the property. If you find these types of structural issues, move onto the next property.   

You can also check hard surface floors for gaps and cracks and check for cracks in drywall in the corners and around the windows. This may take a little more time, but if you suspect an issue that’s not immediately apparent, use these tactics to investigate further.

 Next Stop - The Basement

The basement is the keeper of many secrets including the type of construction, the quality of the materials used, and the quality of the builder. You can also find out the age and working order of the major systems in the house including heating and cooling, plumbing, and electrical.

Heating and cooling systems aren’t as worrisome as electrical, so let’s talk wiring for a minute.

When it comes to electrical, if you find a fuse box instead of breakers, you will most likely need to do some updating. Char marks on the electrical box indicate a fire hazard and two prong outlets indicate the need to update wiring. When I say updating, I mean you will probably end up re-wiring the entire house and updating the fuses to breakers. This is very costly and could cost tens of thousands of dollars, but will add no value to the house. 

Close-up of an old fashion breaker box

Next check for water damage, dampness, mold, or mildew in the basement. This could be an easy fix such as mold remediation or could indicate a much bigger, much more costly problem. Water damage issues can be among the most costly to repair, so if you see evidence of water or dampness, take this very seriously and do some additional investigation if you’re still considering purchasing the property.

You’ll also want to check bathrooms and the kitchen for water damage as well as the caulk around sinks and seals around windows for leaks.

 Check The Roof

A close up view of shingles being blown off a roof and other roof damage

The lines of the roof should be straight and there should be no waves or dips. Again, replacing a roof is a costly project that doesn’t add much value to the property. You certainly won’t recoup dollar for dollar what you put into a new roof.

If you’re looking at an older house, be aware that there could be lead or asbestos, which is not something that you want to get tangled up in.

 Finally, Look At The Layout Of The House

unique white house in shape of chonch shell

If the layout and basic style of the house doesn’t make sense to you, it probably won’t make sense to other buyers and you’ll end up holding onto the property much longer than you bargained for.

If any of these red flags are apparent, move onto the next property. If you are dead set on a property with issues, have a full home inspection done, a complete repair estimate by a licensed contractor, and, if there are structural issues, get the advice of a structural engineer before making any buying decisions. If it were me, I would move onto the next one. There are a lot more properties out there that carry a lot less headaches.

Repair Estimator Spreadsheet Template - Free Download

Do you have some tried and true warning signs of your own? Let us know what they are by leaving a comment below.