3 Big Mistakes Commercial Real Estate Investors Should Avoid


Reasons to invest in commercial real estate

Let’s face it: there are many reasons to invest in commercial real estate. Above average returns, steady cash flow, and the possibility of set working hours top the list for many folks. Whether you’re an experienced investor who is well-acquainted with the process or you’re a rookie who is just getting to know the commercial real estate investing basics, there are some common investment mistakes you’ll certainly want to avoid. This is especially true if you’re in need of hard money loans for real estate investors. Your real estate investment lenders want you to do well with your property. Here are three of the biggest blunders to avoid in commercial real estate investment:

  1. Performing inadequate due diligence
    Above all else, failing to perform due diligence is the top mistake that can lead to disaster. You have to consider both the conditions of the current market and of the property in order to make a determination on whether it’s a good time or place. You need to be familiar enough with the demographic makeup of the area to make a judgment about whether this is a good investment. Look at population growth, rate of employment, average income, and the supply and demand of the area. You also need to be fully informed about the condition of the property, area laws, and tax and insurance liabilities. If you don’t know how to do something or how to get the information you need, hire a professional. It’s much better to pay for help from an expert up front than to try to do a job yourself and suffer for it down the road.
  2. Taking too big a gamble
    Your real estate investment lenders will tell you that everything comes down to the math. Commercial property investment is a numbers game. Although there are certain risks that come with the acquisition and operation of any type of property, you need to go by real numbers and not a projection of potential income. Your property needs to be valued on its present income and not what it could potentially earn in the future. You should not make assumptions about being able to raise tenants’ rents or cut corners to save on maintenance. Some investors will know that a property presents too big a risk, but they gamble on it anyway — and often lose big. If the numbers don’t work, know enough to walk away.
  3. Not getting expert advice
    It’s important to have a team of experienced and trusted professionals around you when you’re making an investment, especially if you lack experience. There’s a higher risk associated with hard money rehab loans, and with an even bigger risk, you need to make sure you have the best people by your side. Don’t make the mistake of going into a commercial real estate property alone. It’s a tricky business, and even the most seasoned investors enlist help from a qualified and devoted team. If you’re looking into exploring the realm of commercial property investment, you can receive some of the help you need from real estate investment lenders, contractors, accountants, and others to ensure your investment is a success.

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