Mistakes that commercial real estate investors must avoid
The commercial real estate venture you are about to embark upon seems too good to be true. As a result, you are eager to dive into this investment with minimal knowledge of the property and minimal experience in investing.
This is not a good way to start such an investment plan. It also is not what an experienced and educated commercial real estate investor would do, either. This can be one of several costly mistakes when it comes to commercial real estate investing.
Failing to diversify
Research, knowledge, patience, practicality and relationship building are key attributes of a successful commercial real estate investor. By learning about markets, investment properties and teaming with the right financial partners, you may avoid the following mistakes:
- Having rigid and inflexible ideas regarding certain markets and properties: This may be that too-good-to-be-true investment situation. Keep your eyes and mind open, learn from investor colleagues and do not focus on a single property. Enlist the help of an asset manager who can help determine what may be right for your investment portfolio.
- Neglecting to diversify your investments: This mistake comes in tandem with the one above. Every market is different and so are the upturns and downturns in each. Study different regions carefully and spread your investments around these different regions.
- Failing to grasp the responsibilities of a manager: You must look beyond the money aspect and understand the additional duties such as finding tenants, negotiating leases and contracts along with properly maintaining the properties. Wide-ranging responsibilities exist.
- Having preconceived ideas and expectations of investor partners: Each investment partner should have specific duties because each brings different strengths to the fold. To fend off potential conflicts within the partnership, negotiate and create contracts specifying the roles and duties of each person.
A combination that includes the right investment opportunities, the right partners along with knowledge and understanding what you do not know may lead to a prosperous endeavor.
Know your strengths, markets and partners
A single mistake or an abundance of them can be costly for a commercial property investor. Such mistakes may lead to aspirations falling by wayside rather than successfully launching as you had expected. By studying prospective markets, knowing your strengths and your investment partners, success may not be far away.