Investors Cite the Money Pits That Are Costing Them

Kitchen under construction

© Donald Iain Smith - Tetra Images/Getty Images

Smart buys are crucial in an elevated housing market. Fifty-three percent of real estate investors say they’ve lost money on projects, according to the Q1 2022 Real Estate Investor Survey released by Kiavi, a provider of financing to real estate investors. They cite hidden issues with properties that they weren’t aware of when they made their purchase as the main reason for losing money.

Another factor that contributed to losses was the location. Real estate investors said they had chosen an area to renovate a home that ended up not being profitable.

Further, 31% said they invested in the wrong renovations and that caused them to lose money on their real estate investments as well, according to the Kiavi survey.

Inside the property, real estate investors say they have to watch for potential money pits that could zap profits. For example, 23% of real estate investors surveyed said plumbing is most often the biggest money pit when dealing with older properties. Nineteen percent of investors cited both the home’s structural integrity and the roof as well. Fourteen percent said unsafe lining materials, such as asbestos, created a money pit investment for them.

Overall, real estate investors say the three most important factors in determining whether an investment property is a good investment are: Purchase price, location, and the potential resale price.

Real estate investors say that kitchen renovations tend to net the highest ROI in investment projects. Additional high ranking renovations include:

· Flooring (16%)

· Master bathroom (15%)

· Another bathroom (14%)

Real estate investors also said an interior paint job helped to boost profits for a renovated investment property, according to the Kiavi survey.