Success in land investing is as much about identifying and avoiding bad deals as it is about finding good ones. Red flags are warning signs that a property may have underlying, costly, or legally complex problems that will destroy your profit margin and slow down your flip. Your due diligence must be a relentless search for the reasons not to buy a property.

The Tainted Title

The biggest red flag of all is anything that jeopardizes your clear ownership and marketability of the property.

• Unresolved Liens: A seller who cannot or will not provide a clear title is a huge risk. This could be due to outstanding tax, mechanic’s, or judgment liens. How to Avoid: Always require a preliminary title report as a contingency of the sale.

• Unclear Ownership: If the property is owned by a deceased party’s estate, ensure the seller has the legal authority (e.g., through probate) to sell. If ownership is shared by multiple heirs, you must secure signatures from all of them.

• Unrecorded Easements: Sometimes, a utility company or even a neighbor has a right to use a portion of the land, but it was never officially recorded. How to Avoid: Insist on a recent survey and personally walk the property to check for signs of long-term use (e.g., maintenance roads, utility markers).

The Unbuildable Site

The land’s physical limitations can render it useless for development, making it unsellable to your target market (builders/developers).

• Failed Perc Test or Low Water Table: The most common deal-breaker for rural land. If the land cannot support a septic system, it cannot be developed. Similarly, if drilling a well is prohibitively expensive or yields poor water quality, the land is heavily devalued.

• Floodplain/Wetlands Designation: If the property is entirely or substantially within a FEMA designated flood zone or identified as wetlands, development will be impossible or subject to severe, costly regulations. How to Avoid: Check the FEMA Flood Map and the county’s GIS map for wetland designations before making an offer.

The Zoning Lock-Up

Zoning issues are a legal barrier that cannot be fixed by grading or clearing.

• Non-Conforming Use: The seller is using the land for a purpose that is no longer permitted by current zoning (e.g., running a commercial business in a newly zoned residential area). This “grandfathering” often ends when the property is sold, leaving you with unusable land.

• Excessive Minimum Lot Size: Zoning may require a minimum of 5 acres for a house, but the parcel you are buying is only 3 acres. How to Avoid: Call the planning department directly and state your intended use (e.g., “build a single-family home”) and ask for the minimum requirements for that specific parcel ID.

The “Too Good to Be True” Price

In land wholesaling, deep discounts are the goal, but an offer price significantly below comparable sales should trigger alarm bells, not immediate excitement.

• Why is it so cheap? There is almost always a costly reason:

  • It may be landlocked without legal access.

  • It may be the remaining non-buildable sliver of a previously developed large parcel.

  • It may have severe contamination (e.g., former industrial site).

The rule of thumb for land investing is simple: If you can’t easily discover the reason for a low price, assume the worst and walk away, or budget for a Phase I Environmental Assessment.