Dos and Don’ts for Commercial Real Estate Investorsby: Confilabs
One of the most lucrative investments today is real estate. Risky for those not well versed with its nuances or trends, it’s important to avoid costly mistakes to ensure a good return on your investment. Here are some some dos and don’ts for real estate investors.
Do have a plan. Before investing your hard earned dollars in real estate you should have a plan. Having a proper investment plan better equips you to recognize the right property when it comes along. Many real estate investors make the mistake of buying a commercial property because it seems like a good deal and then attempt to see how to make it fit into their plan. But seasoned real estate investors not only have a plan, they make offers on multiple properties while concentrating on the numbers they planned for in their investment strategy.
Don’t believe the infomercials and the hype that you can make money quickly. Many new real estate investors think it’s easy to get rich in real estate. Infomercials have perpetuated this myth. In reality investing in real estate should be for the long-term.
Don’t think you can invest in real estate single-handedly. Successful real estate investors rely on a team of professionals to assist them in real estate deals. Commercial real estate brokers, appraisers, home inspectors, lenders and closing attorneys are all an essential part of achieving success in real estate investing.
Don’t overpay. New real estate investors often overpay for commercial property. Paying too much for a commercial property locks up your funds, often leaving you with less cash flow and not enough money to redeem yourself. New real estate investors often overpay because they haven’t done enough homework. Any field of business requires training and homework and real estate investing is one of them. By learning the fundamentals you’ve laid down the groundwork, better preparing yourself for investing in real estate and achieving success.
Do know your property. There’s nothing wrong with being cautious when making a deal. Many new investors sign the dotted line without doing enough research on a commercial property. Real estate investors working with commercial real estate agents not only have a better insight when it comes to the property’s history, but with securing established and new tenants.
Don’t miscalculate cash flow. Many successful real estate investors buy, hold and rent out properties for the long term ensuring they have enough cash flow for maintenance and other expenses. Savvy real estate investors allocate their budgets so there is sufficient coverage for expenses like the mortgage, taxes, insurance and advertising costs. When you don’t have enough cash flow your property becomes a liability when it should be an asset.
Do have an open mind. Just because your former tenant was a dental office doesn’t mean your new tenant has to be. This is why buying versatile commercial properties that allow a number of options is a wise strategy. When the real estate market fluctuates you’re better prepared to tackle unexpected situations and you experience fewer losses.
Do plan for the worst. Many new real estate investors make incorrect estimates like the amount of time it will take to convert the space for their new tenant. Miscalculations cost commercial real estate investors money.
Abiding by these dos and don’ts will help you to avoid some of the more common mistakes new real estate investors make.