Commercial real estate has long been a sound investment. They can potentially perform even better than stock market investing, and real estate is generally less prone to fluctuation. But like all investments, commercial real estate comes with some risks. You can mitigate these risks by knowing what common mistakes to avoid in commercial real estate investments.
Picking the wrong property
There are many types of commercial real estate, but the most profitable ones are office, multifamily, industrial, and retail. The key is understanding each property type’s pros and cons and picking the right one for you. For instance, multifamily properties typically have much higher returns but require a lot of maintenance. On the other hand, industrial properties need very little care but don’t perform as well financially. The key is finding the best property to fit your budget and expectations.
Not doing your due diligence- or doing too much
This one can be a tricky balancing act. You want to do your research before buying a property by asking the current owner questions and determining things like maintenance costs, profitability, and if it’s an apartment building, vacancy rates. At the same time, you don’t want to get so caught up in the tiny details that you lose sight of the big picture. If you do, a more savvy real estate investor might swoop in and buy the property while you’re still debating with yourself. Commercial real estate is a competitive market- wasting too much time on a decision can be just as fatal as making a decision too quickly.
Doing everything by yourself
We strongly recommend hiring a real estate professional to not only help you determine what property to buy but to help guide you through the process. It may seem like you can save money by doing it yourself, but real estate professionals take a lot of the hassle and heartache out of commercial real estate investment and are cost-efficient. They have a vast network of local professionals that can also help you make the best decision for you, all of which can help you avoid creating even more mistakes.