Fixer-upper homes are the perfect option for people looking to earn extra money through renovation and resale. But even though investing in a fixer-upper to earn passive income can seem like a no-brainer, finding the right one isn’t so easy. From financing restraints to uncertain resale values, fixer-uppers can come with quite a few challenges to navigate.

However, by knowing what to look for in a fixer-upper, you can turn a shabby property into your dream investment. So to avoid costly future mistakes, here are six common red flags to avoid when considering a fixer-upper home.

Pest Infestations

Pest infestations are a common problem that many homeowners have. Creepy crawlers like termites, rodents, or insects can cause a lot of damage to the structure of your home, which in turn, puts you at risk.

The easiest way to stop a pest infestation is to catch it before it happens. Be vigilant when checking for pest activity. Look for clues like tiny, dark-colored droppings, bite marks, or hollow-sounding wood. If you notice any of these, take prompt action by scheduling a professional pest inspection to assess the extent of the infestation and treat it accordingly.

Mold and Water Damage

Older properties are a breeding ground for mold, which can lead to serious health problems for occupants. Water damage is another common occurrence in older homes due to leaky roofs, pipes, or poor drainage over time.

When checking out a fixer-upper, look for any indicators of mold growth and water damage like water stains, musty odors, or peeling paint. If you look carefully, you might even spot visible mold growth in certain areas like the basement, bathroom, and around windows and doors.

Beyond being costly, mold remediation can be a threat to your health. If you notice any of these signs, call in a professional to evaluate.

Structural Issues

When touring a fixer-upper, one of the most important red flags to look out for is structural damage or instability. A home without a proper foundation is unsafe to live in. To keep yourself protected, take a look at the most common five signs of structural damage below:

• Cracks in the foundation
• Sagging or uneven floors
• Leaning walls
• Gaps between the walls and ceiling
• Doors or windows that won’t close properly

If you happen to spot one or more of these signs, reach out to a professional contractor for further evaluation.

Poorly Executed Renovations

If the home you’re eyeing underwent extensive renovations or DIY projects, be sure that it had the proper permits and professional oversight to do so. Poorly executed renovations result in subpar workmanship, code violations, or hidden structural problems — all of which can threaten your health and safety.

Avoid this by checking for signs of shoddy work, which can look like uneven flooring, mismatched materials, or improperly installed fixtures. That way, you have peace of mind knowing that your dream home doesn’t need a major overhaul.

Outdated Electrical and Plumbing Systems

Older homes tend to have outdated electrical and plumbing systems, especially if they’ve been poorly maintained or even outright abandoned. Because of this, they typically don’t meet current safety standards or building codes, making them unsafe to live in.

To be on the safe side, be on the lookout for red flags like faulty wiring, flickering lights, frequent circuit trips, or outdated electrical panels. And because repairing or replacing these systems can cost a pretty penny, be proactive by looking at the plumbing fixtures and pipes to spot any leaks, corrosion, or signs of deterioration before they add up.

Undisclosed Liens or Encumbrances

Before you commit to buying a fixer-upper home, be sure to conduct a thorough title search to know if there are any undisclosed liens, easements, or encumbrances that can affect the property’s ownership or use. Having unresolved legal issues can delay the sale process and potentially cause financial liabilities for you, the buyer.