Top 5 Mistakes When Investing in Commercial Real Estate – and How to Avoid Them
Commercial Real Estate can be a great financial investment, but there are also risks involved when purchasing commercial property. There are many different ways to increase your chances of success when planning your purchase, but there are even more mistakes to avoid when investing in commercial real estate.
Experts say to avoid these top 5 mistakes to in order to be successful in commercial real estate.
Not Performing Due Diligence. When you’re ready to start investing in commercial properties, it’s extremely important to not skimp on any type of research. Many new investors decide to save money by skimping on due diligence by not finding out all the necessary information regarding assets and liabilities regarding their prospective property. In fact, it’s come to light that lenders are more engaged in due diligence than the buyers! Always have enough information about the property including information about potential upgrade costs and profits, as well as maintenance costs.
Always Plan Ahead! When you are ready to purchase your property, it is VITAL that you have an idea of your expectations and plans for the building’s future. This includes financial plans in addition to any practical plans. Financials should include any upfront costs, expenses, mortgage payments, and the income needed to support these expenses.
Choose The Right Size Property. When purchasing a commercial real estate property it is important to consider the future growth of the company. Purchasing a property that is big enough for potential expansion is important. If possible, buy something a little larger than necessary, this will prevent the need to sell and purchase a new property down the line.
Research Your Location. Depending on your type of business, you will want to research the location of your property and if it is a good place for foot traffic or neighborhood demographics. Consider your target market, and also consider local zoning ordinances as well. Be 100% certain that what you intend to use the property for is allowed in the area you’re purchasing.
Don’t Rush Into Your Purchase. Remember, buying a commercial property is a big step. Don’t be quick to pull the trigger based solely on past successes. It is important to research several options and properties before committing to the right one for you and your business. Be sure to consider all the factors that go into the property. These include taxes, permits zoning, neighbors, competitor locations, budget, etc.
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