Overall, commercial real estate is a pretty good investment, but you have to handle it wisely. As with any investment venture, there will be challenges to face and pitfalls to avoid, so it always helps to have a good idea beforehand of what to expect.
Whether you’re getting started in commercial real estate investing or if you’ve been at it for a while, the following common mistakes can help you avoid losses.
Failure to Match Property to Your Needs
One set of problems comes from failing to match the property to your business’s needs. If you’re investing in property, consider your purposes for doing so.
For instance, if you’re planning to rent the property out, purchasing a couple of lower-priced properties may give you a better return than a single expensive one. On the other hand, if you’re looking to improve it and sell it, you’ll want something that’s easy to liquidate, which may rule out less expensive options.
If you plan to do business within the property, consider its cost versus your current cash flow. Would it make sense to pay a mortgage with your current revenue? Would that cost bring any kind of return?
Location and previous uses for the property also have an impact on business operations. For instance, if a building was previously used for chemical processing, it’s probably not a good idea to use it for food-related operations.
Seeking Financing Too Late
Another common pitfall is seeking financing too late. It can take some time to be approved for a commercial real estate loan, and there’s no guarantee that you’ll be approved for your first option.
Lenders also have specific underwriting requirements, and it can take some time to make sure those requirements are met. Taking the time to determine what is required from you during the process will help you in the long run.
In addition, you’ll typically get the best deal if you try applying for multiple loans at once. This increases the odds that you’ll get the best deal possible, but it does take time. As such, it’s important to get this process started as early as you can.
Rushing the Process
In addition to taking the time to get approved for a loan, you’ll also need to avoid rushing the buying process itself. Commercial real estate negotiations are intense, and anyone who doesn’t take the time to handle those properly will be put at a severe financial disadvantage.
Due diligence is also important, and that can take a while. Make sure you take the time to learn as much as you can about a property before purchasing.
Not Using a Real Estate Attorney
The final pitfall is not using an attorney with experience in real estate. You want someone who will be familiar with the nuances of buying and selling property, such as closing processes, zoning laws, the timing for inspections, and so forth.
A real estate attorney will not only bring vast knowledge to the table, but they’ll also represent you during negotiations. This is absolutely vital in commercial real estate, so you can’t afford to skimp in this area.
When you’re looking into commercial real estate, the attorneys at Hart David Carson LLP provide extensive real estate experience. For the legal assistance you need, contact us today.