5. The seller asks you to waive your right to inspect
It's fairly common for a seller to list an investment property as "as-is" or "will make no repairs," especially if it's an older property or a fixer-upper. However, it's not common for sellers to ask buyers to waive their right to inspect and back out of the deal if they don't like what they see.
The only reason I would ever waive my right to inspect is if I planned to renovate the property all the way down to the studs or tear it down. Even then, I still wouldn't consider it unless I was getting a tremendous deal.
6. Evidence of structural issues
If a property has uneven floors or you see cracks on exterior walls, it could have structural or foundational problems. These can be very costly and time-consuming to fix. I typically won't go near a property with structural problems unless I'm getting a phenomenal bargain.
7. Bad neighborhood or school district
This is perhaps my biggest red flag for a simple reason: You can change nearly everything about a property given enough time and money -- except its location. If a property is located in an area with a high crime rate or an undesirable school district, the price needs to be really enticing to get me interested.
The same can be said if a property is in a flood zone or has other location-specific problems. Your real estate agent should be able to tell you where the higher-crime areas are in your target market as well as what schools parents want their kids to go to. Zillow also has some good information, particularly on school districts.
8. Sentimental sellers
In my experience, there's little sense in negotiating with sellers who have an emotional attachment to a rental property. As an investor, it's a simple matter of dollars and cents -- if a property makes sense financially, you'll buy it. If it doesn't, you'll move on.
For example, I was looking at a package of two duplexes that the seller inherited from her late father. It was listed for $350,000. After crunching the numbers, I determined that I could pay no more than $300,000 or else the investment would have negative cash flow. I offered $275,000 to start, and the seller countered with $349,500 (what a discount!). I upped my offer to $295,000, told them that it was final, and the seller didn't budge. The listing agent informed us that the property had been on the market for six months because the seller "just knows it's worth $350,000."
This was nearly a year ago and this property is still on the market today.
These days, I try to get a feel for how attached a seller is to their property before I start the process. Usually, listing agents will tell you if there's wiggle room in the price or not.
9. Bad floor plan
Some design issues can make it difficult to rent a property out. For example, if you have a three-bedroom house but one of the bedrooms is the size of a closet, it can be a major turnoff to potential tenants expecting three full-sized rooms. Tiny kitchens or closets can be another problem. Few closets in a home can drive potential renters away.
Another example I run into often because I invest primarily in older homes is a single bathroom for three or four bedrooms, especially if it's not on the ground floor. If you've never lived in a two-story home built before the 1960s, you may not realize how common this is.
A bad floor plan isn't necessarily terrible, but it's important to realize that floor-plan issues can severely limit the property's rental income potential.
Is a red flag a deal-breaker?
Aside from not being allowed to see the inside of a property before closing and sellers who won't budge on unrealistic listing prices, none of these are automatic deal-breakers. However, you should take them into account when shopping for investment properties. Adjust your offer based on how they may affect your income.