7 Signs a Deal Is Too Risky (Even If It Looks Good on Paper)

Real Estate Rookie

BiggerPockets

How To, Education, Business, Investing, Entrepreneurship

4.8 • 1.7K Ratings

🗓️ 12 November 2025

⏱️ 40 minutes

🔗️ Recording | iTunes | RSS

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Summary

Think you’ve just stumbled on the perfect real estate deal? Not so fast! The truth is that some rental properties may look good on paper but are actually much more trouble than they’re worth. Today, we’re going to show you seven warning signs to look out for before closing on your next property! Welcome back to the Real Estate Rookie podcast! In this episode, Ashley and Tony are breaking down seven of the most common (and costly) red flags that can quickly turn a rookie investor’s “dream deal” into a financial nightmare. Whether you’re doing a BRRRR (buy, rehab, rent, refinance, repeat), flipping houses, or even house hacking, you won’t want to make these critical mistakes that could drain your time, energy, and money. You’ll learn the keys to proper real estate analysis, like calculating “hidden” costs and lowering your risk by accounting for the worst-case scenario. We’ll also show you how to avoid getting in over your head with a renovation project and why you should never bank on appreciation—especially at the expense of cash flow. If your property doesn’t have any of these red flags, chances are you’ve got a great deal! In This Episode We Cover Seven red flags to watch out for when buying a rental property Why buying the “cheap” property could cost you way more in the long run Taking on renovation projects that align with your skill level How to stress-test a deal so you still profit in a worst-case scenario Why you should never sacrifice cash flow for potential appreciation And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/rookie-639 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[email protected]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Today's episode is all about those deals that look amazing on paper, the ones that make you think, this is it.
0:06.9	This is my breakthrough deal.
0:08.6	But actually, they may have some risk hiding underneath them.
0:12.2	Yeah, and we've both had moments where a deal checked every box on the spreadsheets, but once we dug a little bit deeper, we realized it could have been a disaster.
0:24.6	Yeah. we dug a little bit deeper, we realized it could have been a disaster. So if you're analyzing deals and wondering, how do I know when to walk away?
0:29.1	We're going to break down the red flags that should make you pause and rethink the deal.
0:33.8	Whether it's your first property or your fifth, these are the traps you need to watch out for
0:38.0	before wiring your earnest money. So your deal only works when everything goes perfectly or you
0:44.9	don't go over your contingencies. So there's no vacancies, no repairs, full rent from day one.
0:50.1	That's a sign that it might be too tight because the chances of that happening on a deal that you're never going to have any of that is really, really slim.
1:00.1	So the first thing you need to make sure is that you're not accounting cash flow as just your income minus your fixed expenses, such as the mortgage payment, the insurance, the property
1:12.8	taxes, you know, things that you're going to be paying every month, any utilities. You want to
1:18.5	make sure that you are accounting for the vacancies, the repairs and maintenance, and the
1:25.2	capital improvements on the property. And that is a big mistake where
1:30.4	you're looking at the Bigger Pockets Calculator report and you're saying, you know what, I probably
1:35.1	won't have, you know, repairs or I don't need to save for cap X because just if something
1:42.2	happens on the road, the roof is newer. I probably won't have to
1:45.7	replace it for five years. I can just pull together a chunk of money that I've saved up and
1:51.6	buy the roof then. But that is not giving you an accurate account of if this deal will
1:58.1	work in or not for you and if it's actually a good deal.
2:02.1	Tony, what are some things on the short-term rental side that maybe you see as like red flags
2:07.8	that people are missing and not accounting for that's like not giving them that the accurate look
	...

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