Investing in commercial real estate takes patience, lots of money, research and, especially, knowledge. Pursuing such a venture represents a way to diversify an investment portfolio and, like any other investment, it requires a calculated approach. As an investor, you want to ensure that that you are taking the correct, yet cautious steps that lead to a reliable investment.
Going it alone remains an option, but many commercial real estate investors form alliances with other investors to acquire a wide list of properties in the region as well as around the country. And working with partners likely provides you a chance to gain a mentor, who can provide crucial insight and share the experiences and mistakes they made.
Hasty decisions, failure to diversify
Mistakes pertaining to commercial real estate investment may be unavoidable, but they can be tempered. Here are certain types of mistakes made by commercial real estate investors:
- Making hasty decisions without thorough research: “Shop around.” Tour an assortment of properties rather than focusing on a specific property that you think is desirable. Compare them and determine the criteria for what would be a reliable investment. It may be beneficial to rely on an asset manager who understands markets, knows what to look for in commercial properties and determines their investment potential.
- Neglecting management and supervision responsibilities: This mistake can be costly in money and time. Budgets must be created and maintenance costs reviewed, too. Retaining a property manager is an option, but make sure this company has the knowledge and experience and the fees are not exorbitant.
- Avoiding necessary discussion with partners: Disagreements are bound to occur with a team of investors. Do not avoid such discussions. Contracts are an essential tool that may help by providing property management plans as well as when to sell.
- Failing to diversify property investments: You, as an investor, know that “having all your eggs in one basket” is not a good thing. If you diversify your personal investments, you should subscribe to the same philosophy regarding your property investments. Look into investing in different types of properties in different locations.
Risk comes with commercial real estate. Investors understand this when they pursue such investments. However, by failing to avoid certain mistakes, you are simply adding to that risk.