Learn and Earn – 4 Mistakes to Avoid When Investing in Commercial Real Estate

Updated on June 18, 2019
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Photo by Owen CL on Unsplash

Even veterans of residential property investment often feel out of their league when delving into the commercial real estate realm. The benefits and challenges are entirely different to those posed in the housing scene, and even the most seasoned investor can feel like they’re playing a whole different ball game if they’ve never dealt with this type of investment before.

The upside to this is that it levels the playing field, allowing those looking to start their portfolio to get established just as quickly as those looking to expand. The downside is that there are far fewer people to turn to for assistance. Luckily, there are still some resources available, and if you know where to look, what to do, and perhaps most importantly, what not to do, you can get an edge on the competition.

Mistake 1: going it alone

The first essential step is to find yourself a good commercial property manager. It’s their job to know what to look for and what to avoid, so their advice will be paramount in finding the best investment for your situation. They’ll also be able to orchestrate all the permits and paperwork necessary to ensure your new venture is entirely above board with nothing that can come back to bite you. Likewise, you’re going to want a good, trusted lawyer to back your property manager up so that they can iron out any kinks on the legal side of things.

Mistake 2: not doing your research

Even the best property manager won’t be able to find you something you’re perfectly happy with if you haven’t done your own research and worked out what suits your goals. You can get the best advice on the market, but if your end purchase doesn’t line up with your dreams for the future, you’re not going to love it. Know what you want and adapt during the hunting process if what you originally planned it unattainable. This way, you’ll end up with a far better result than if you just asked an advisor to find you something.

Mistake 3: missing the big picture

Make sure you have a plan for how your new investment is going to fit in with everything else in your life. If you don’t understand how this purchase fits with the rest of your expenses, you may run into issues, so this point is just as important as the first one. A building you’re not entirely in love with can still be sustained and turn a profit. However, one you haven’t factored into your overall budget can be a massive drain on your finances. Just because you can afford something on paper, doesn’t mean you can maintain it in reality without your lifestyle suffering.

Mistake 4: not having a kitty

Speaking of maintenance, your new investment is going to need it, and you’d be surprised at how many people don’t factor this in when working out how much they can spend. The initial purchase price is always going to be the most significant expense, but things such as burst plumbing or worn carpet are going to need replacing, and they can be deviously good at sneaking up on you. Make sure you have money set aside for the not so obvious expenses, or your plans could unravel.

Buying your first commercial property is an exciting time, but you can’t let your ideas and dreams take over from what’s realistic. Do your research, get the right help, and know what you want. As long as you do this, the rest should fall into place without too much trouble.

Happy hunting.


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