6 Types of Real Estate Investing to Avoid in Houston TX

As a self-study or any experienced real estate professional will guide you, not all properties are worth investing in. Simply said, not all properties in the market have equal worth or possess the same level of rewards and risks. For instance, homes that are perfectly habitable for primary residence, may not guarantee you positive earnings, and with a negative cash flow, you are losing your capital over time rather than creating it. Let’s examine some of the real estate investments that can be your worst moves if opted in Houston TX.

1. A property that does not promote rental earnings

Land investments and second homes are the best example of properties that typically does not generate rental income for you. A number of people tend to invest in such properties hoping that the value would go up in future. But the fact always remains that there is an opportunity cost present by having money in real estate that does not pay you any income. Let’s suppose even if the value does go high, then also you have got to reconcile for all the money you could have gained had it been invested in stocks, bonds, etc.

2. Investment with a negative cash flow

If you purchase a “Prize Property” such as a fancy and expensive condominium, water-front house, or a vacation rental, then it’s easily going to take 20 years or more before initiating the first stream of positive cash flow. Obviously, not many of us are going to wait that much or consider this as a feasible option to invest our hard-earned money. Instead you can go for some moderately priced properties in locations other than the above, to start generating a favorable cash in-flow soon enough.

3. Development Deals

Land development presents extremely high risks such as entitlement, market and construction pricing uncertainties, and many others. These types of investments are best to be left for highly experienced investors who have a substantial financial backup and time to re-stabilize themselves in case of significant losses.

4. Tenant-in-common (TIC) Investments

TIC investments were a popular choice between 2005 and 2007 mainly preferred as a way to diversify a portfolio without having to deal with the complexities of ownership and management of real estate. But very few people can be traced who have actually earned something after removing costs and expenses incurred in acquiring these investments.

5. Foreign Real Estate Market

You may have done your research regarding investing in a foreign country, but let’s not forget that each country has its own real estate laws, fluctuating currencies, and many other risks. All these factors are highly uncertain making foreign investments a risky game to play with.

6. Luxurious Condo-Hotels, Time-Shares and Intervals

Basically, these could not be even counted as investments. These choices do not guarantee or predict any cash flow, sales price, future value, rental earning, etc. Also it is very difficult to hunt a buyer for reselling, and even if sold, they would typically go at only a fraction of the original price.