When many people first start thinking of investing in real estate, they’re under the impression that as long as they get a property for a good price, they’ll be on their way to success. Boy, is that wrong. The reality is that no matter how great a deal looks on paper, location is everything. You could snag a property at a steal, but if other factors aren’t in your favor, you’re setting yourself up for headaches and potentially a lot of lost money.
It’s not just about where people want to live today, but where they’ll want to live tomorrow. Neighborhoods change, economies shift, and that property that seemed like a goldmine might just end up being a financial sinkhole. After doing a deep dive into the market, we’ve compiled a list of places where your money is better spent elsewhere.
So, let’s talk about where not to buy. Here are 14 undesirable places every smart investor should avoid if they’re looking for a great return—no matter how tempting that initial “great deal” might seem.
1. Declining Population Areas
If people are leaving an area, that’s your first clue to stay far away. A shrinking population means there’s less demand for housing, plain and simple. You can get the property for next to nothing, but you’ll have a hard time renting it out—or selling it for that matter.
A declining population is usually tied to poor job prospects or an economic downturn, and those aren’t trends that change quickly. It’s like buying a house on a sinking ship—you’re not going anywhere but down.
2. Areas Prone to Natural Disasters
You might be dreaming of a beachfront condo, but if it’s in a hurricane zone, think twice. Properties in areas prone to natural disasters—think hurricanes, floods, wildfires—are a massive risk. You’ll not only be paying out the nose for insurance, but you’ll also be dealing with potential costly damages.
Let’s not forget, tenants aren’t going to flock to an area where they fear their home might be destroyed every few years. So, unless you’re willing to deal with the constant stress, it’s better to avoid these regions altogether.
3. Overdeveloped Markets
When a city gets overdeveloped, the market can get saturated with too many options for buyers and renters. Sure, it’s a booming area right now, but if there are a ton of new properties popping up, the competition can drive prices—and your profits—down fast.
It’s all about supply and demand. If there’s more supply than people looking to rent or buy, you’ll have to drop your prices just to stay in the game. Overdevelopment often leads to a bubble that can burst, leaving you stuck with a property that’s hard to move.
4. Places With High Vacancy Rates
High vacancy rates are a huge red flag. If other properties in the area are sitting empty, there’s usually a reason. It could be economic issues, lack of jobs, or simply an undesirable location. Either way, if no one else wants to live there, it’s going to be tough for you to attract tenants or buyers.
Don’t get tricked into thinking you’ll be the exception. High vacancy rates mean low demand, and that’s bad news for anyone looking to make money off a property.
5. Cities or States With Rent Control
Rent control laws might seem like a good idea if you’re a tenant, but for landlords, they can be a nightmare. Strict rent control means you can’t raise rents to keep up with inflation, rising property taxes, or maintenance costs.
Even worse, you might end up stuck with long-term tenants paying way below market rate. In cities with aggressive rent control policies, your earning potential is capped, and it can severely limit your return on investment.
6. Towns Dependent on One Industry
Towns that rely on a single industry—whether it’s oil, coal, or manufacturing—are a high-risk gamble. If that industry tanks, so does the local economy. Job losses lead to population decline, and suddenly, there’s no one left to rent or buy your property.
Even if the industry is doing well now, these boom-and-bust economies are unpredictable. When the jobs go, so do the people, and your investment could be left high and dry.
7. Areas With Poor School Districts
Properties in areas with underperforming school districts often struggle to appreciate. Families tend to flock to neighborhoods with good schools, and if a property is in a bad district, it can be tough to find long-term tenants or buyers.
Even if you personally don’t have kids, the school district plays a big role in property values. It’s one of the first things families check when they’re house hunting, and bad schools can seriously drag down demand.
8. Regions With Poor Infrastructure
Investing in an area with poor infrastructure—crumbling roads, unreliable public transport, or frequent power outages—is asking for trouble. People want to live in places where they can get to work, school, and stores easily, and without those conveniences, your property’s value will stagnate.
Even if the property is in good shape, if the surrounding infrastructure is falling apart, tenants and buyers will look elsewhere. It’s an often overlooked aspect that can make or break your investment.
9. Crime-Ridden Neighborhoods
No one wants to live in a place where they don’t feel safe. High crime rates scare away tenants and buyers, making it harder for you to find anyone willing to rent or purchase your property. Even if you offer low rent, safety concerns will keep people away.
While some investors bet on gentrification improving high-crime areas, it’s not a guarantee—and it can take years to pay off, if it happens at all. Crime is one risk you don’t want to underestimate.
10. Remote Locations With No Growth Potential
It might seem like a steal to buy in a remote area, but without growth potential, your investment is going nowhere fast. Sure, the price is low, but there’s usually a reason—no job market, no infrastructure, no demand.
Unless you’re ready to wait decades for the area to develop, you’ll likely find yourself with a property that appreciates at a snail’s pace, if at all. Remote locations without a clear path for future development are best avoided.
11. Places With High Property Taxes
High property taxes can destroy your profit margins, especially if you’re renting out the property. It’s easy to overlook taxes when you’re focused on the potential rental income, but those bills add up fast, eating away at your bottom line.
Even worse, property taxes tend to increase over time, particularly in areas where local governments are trying to cover budget deficits. You don’t want to be stuck footing the bill for someone else’s financial problems.
12. Tourist-Dependent Locations
Buying in a tourist hotspot might sound like a dream—short-term rentals, constant demand, what’s not to love? But here’s the catch, tourism is seasonal, and that means long stretches of vacancy during the off-season.
Plus, tourism is one of the first industries to suffer during economic downturns or global crises (looking at you, COVID-19). If you’re banking on steady income from short-term rentals, be prepared for volatility and uncertainty.
13. Neighborhoods With Unreliable Utilities
No one wants to live in a place where the power goes out every other week or the water supply is unreliable. Investing in areas with poor utility services isn’t just inconvenient—it’s a deal breaker for most tenants.
On top of that, you’ll likely end up dealing with maintenance issues and repair costs more frequently than in areas with reliable utilities. Tenants will leave, and potential buyers will be turned off by the hassle, making it hard to maintain your investment.
14. Places With an Aging Population
An aging population can be a double-edged sword. While senior living investments can be lucrative, buying a regular property in an area where the population is aging and young people are leaving can stifle your profits.
As younger generations move away, demand for typical housing decreases. If there’s no influx of new residents, property values will stagnate, and you’ll have a hard time selling or renting your property in the future.
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With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
