How to Avoid Stagnant Properties and Maximize Resale Value
Nothing sinks an investor faster than getting stuck with a property that's impossible to sell. And trust me, it happens more often than you think. You don’t want to be that guy—or gal—who can’t move a property for months, or even years, while the market eats away at your capital.
These liquidity traps are avoidable. And if you know how to spot them, you’ll avoid sinking your money into stagnant properties that kill your resale potential.
What is a Liquidity Trap, Anyway?
A liquidity trap is when an asset, usually a piece of real estate, becomes so hard to sell or resell that it's practically dead in the water. These properties are unsellable—either due to their location, condition, or a misalignment with market demand. Buyers don’t want them, and the property just sits there, draining your resources. And let’s be clear: this is not the position you want to be in.
When you're flipping or buying to rent, your goal should be turnover—get in, make your improvements, and get out with a profit. But you can't do that if your property gets stuck. So, let's break down how to avoid liquidity traps and keep your real estate career moving forward.
How to Avoid Liquidity Traps
- Location, Location, Location—No Excuses
Don’t kid yourself. If you buy in a neighborhood that's declining or isolated, you're asking for trouble. Location is everything in real estate, and ignoring that simple rule is the quickest way to get stuck with a stagnant property.
Sure, those deep discounts might be tempting, but unless you have a crystal ball to predict that the area will turn around, you're taking a massive risk. Look for properties in growing areas—those with new infrastructure projects, rising employment opportunities, or an influx of young professionals and families.
Steer clear of properties in neighborhoods with high crime rates, low schools, or heavy vacancy rates. These places won’t attract buyers, and they’ll quickly become a black hole for your investment.
- Don’t Overestimate Fixer-Uppers
Yes, we all love the idea of buying a fixer-upper and turning it into a goldmine. But you better make sure you’re realistic about the cost of repairs. The number of times investors get caught up in a property with huge renovation needs that end up costing more than expected is staggering.
Know your limits. Don’t buy properties that need more work than you're prepared to take on. Be honest with yourself about the repair budget, time constraints, and the after-repair value (ARV). If the repairs don’t add significant value, or if the area can’t support those upgrades in resale price, you’ll be staring down the barrel of a long, hard hold with no profit to show for it.
- Avoid Properties with Niche Features
Some features may seem like a good idea on paper—like a “unique” floor plan or a property designed for a very specific buyer. But the reality? These properties can limit your pool of buyers. If the property is too niche, or if it’s tailored to a very specific demographic (like a one-bedroom house in a suburban neighborhood), you’re narrowing your buyer base. The fewer buyers in the pool, the less liquidity you have when it’s time to sell.
You don’t want to get stuck with a property that only appeals to one segment of the market. Aim for features that appeal to a wide audience—simple, clean, and modern. Avoid over-the-top designs that may not align with what the majority of buyers are looking for.
- Consider Market Cycles
Real estate is cyclical. The market ebbs and flows, and while you might think you've found the perfect time to buy, sometimes the market isn’t where you want it to be. This means you need to be strategic about your timing.
You don’t want to buy in a downturn and hold the property for years before seeing any return. Buy at the right moment, and know how long you expect to hold the property before flipping or selling. You need a plan for a quick exit when things start to stagnate. When market conditions change, don’t hesitate to pivot. If you can’t flip it, you better be able to rent it and maximize cash flow while waiting for the right time to sell.
- Don’t Overpay
This is the big one: You can’t afford to overpay for any property, regardless of how “hot” you think the market is. Paying too much for a property immediately locks you into a hole you may never climb out of.
You need to know the value of what you're buying and stick to the numbers. This means running your due diligence—comparable sales, rent rates, cost of repairs—and making sure your investment still leaves room for a margin of profit. Never, I repeat, NEVER pay more than what the property is worth. You can't expect to magically "make" the property's value grow on its own.
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How to Maximize Resale Potential
- Curb Appeal Matters
Don’t underestimate how much a fresh coat of paint, some landscaping, and a clean exterior can make a difference. First impressions are critical in real estate, and a dull, neglected property won’t sell. Make sure your investment has maximum appeal right from the curb.
A little effort goes a long way. Buyers want to imagine themselves in the property, and they can’t do that if the first thing they see is peeling paint or overgrown grass.
- Target a Broad Buyer Pool
When renovating, keep your audience in mind. Modern, clean, and neutral spaces tend to attract a wider range of buyers. A property that’s stylish but not too personalized will give you the best chance at a quick sale.
Renovate with intent. If you’re flipping the property, ensure the kitchen, bathrooms, and flooring are updated to match current trends without going overboard. Buyers love fresh, updated spaces, and if you’re in a competitive market, this is where the magic happens.
- Stay Ahead of Market Trends
Markets are constantly shifting, and you need to stay ahead of the trends. Know what buyers want in the market right now. From open floor plans to smart-home features, make sure your property is on-point. No one wants to buy an outdated home in a competitive market.
Don’t Get Caught in a Liquidity Trap
In the world of real estate, there’s no room for dead weight. Avoid stagnant properties by making smart, calculated decisions. Buy where the demand is strong, don’t overpay, and know what your property needs to maximize resale. The goal is to keep that turnover rate high, and that means you need to stay sharp, strategic, and focused. Avoid liquidity traps, and you’ll avoid sinking your investment—simple as that.
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Resources:
Mendenhall, Dutch. “Money Shackles: The Breakout Guide to Alternative Investments.” Michaels Press, 2023.
This work includes content generated with the assistance of artificial intelligence (AI).
Dutch Mendenhall’s opinions and expressed views are his own. These are not promised outcomes and do not indicate future results. The content provided is for informational purposes only and should not be considered professional advice. For more information, visit https://dutchmendenhall.com/disclosures/.
