If you lie awake at night fantasizing how making some strategic investments can bring you a steady stream of passive income, the idea of commercial real estate investment likely crossed your mind. But before you jump in feet first, take a breather.
Below are four common blunders that can tank your commercial real estate investments before they ever start turning a profit.
Not sufficiently researching your purchase
You find a property in a good location that is significantly below market value, and you rush in quick to snap it up. Don’t make another move. You need to find out why its price point is so low. Zoning problems, subsidence with the land itself, issues with mineral rights holders and a plethora of other expensive-to-mitigate problems could be why more seasoned investors have taken a pass.
Your brother-in-law or your frat brother from college may be great guys. But they could also be lousy business partners. Have expectations and contributions spelled out in black and white. Include exit strategies as well.
Not having the time
Management of a large commercial property is a full-time job. Failing to stay on top of it because of a time deficit can cause your enterprise to hemorrhage cash. Hire a reputable property management company to protect your investment.
Did not diversify
Diversification reduces risk. You can further mitigate that risk by building a portfolio that includes different geographic locations as a buffer should one property or area underperform.
Seek knowledge and guidance when investing
It’s OK not to know everything about investing in commercial real estate. Learning all you can about the process can help you protect your legal rights if a dispute arises.