Investing in Commercial Real Estate
When investment opportunities present themselves just about everyone would like to be investing in commercial real estate. With this in mind, here are three mistakes you’ll want to avoid making whenever you’re investing in commercial property:
Mistake #1: Not being an expert at what you’re Investing In
“The grass is always greener on the other side” applies within commercial real estate, too.
Many commercial real estate investors have a useful knowledge of one type of commercial real estate within one specific use property or geographical area. Be very careful when presented with an opportunity to invest in a market not familiar. The cap rate offered may be higher than average. The building may appear to be in a better area, may look great, newer, and cleaner. It may not be a better long-term investment for you.
In these situations, ask yourself the following question: “If this Commercial property is such a great investment opportunity, why have all of the local investment experts decided to pass on it?”
Before you decide to purchase the commercial property yourself, you will need to understand why all of these local investment experts have collectively decided to pass on it.
Mistake #2: Not understanding the specific local trends
Why is it that both people and businesses want to be in this area? Is the demand in this area something that you can expect to continue? Are there underlying factors such as zoning changes, new developments or infrastructure changes that could cause this demand to wane over the coming years?
How much the rising cost of energy impact real estate investments within specific locations? Will rising petrol prices and technological changes cause a shift in demand for both people and businesses to relocate from one geographical location towards other areas? If so, how will it affect the desire for your property and business?
Mistake #3: Not doing your homework
Within any given commercial real estate acquisition, you need to be doing your homework. Find out if any red flags indicating potential environmental contamination. Review all the details of the contract leases with your solicitor. Ensure that all financial accounts related to an attached business are examined by your accountant.
When you’re buying commercial real estate, you’ll usually be investing a lot of your own money. Avoid making mistakes like these and be a wiser investor.