4 common mistakes made by commercial real estate investors

On Behalf of | Nov 22, 2023 | Commercial Real Estate

Purchasing a commercial building is a major life milestone whether you are a seasoned investor or are interested in buying your first property. For new and established investors, countless factors must be addressed when purchasing a property. Failing to conduct the proper research could cause you to make common mistakes that are otherwise easily avoidable.

Purchasing the incorrect type of property

When searching for a commercial real estate building, there are a few factors that you need to consider in order to choose the correct type of property for your unique situation. If you are looking for a higher return on your investment, then it may not be wise to purchase an industrial building. However, industrial buildings will also require less maintenance compared to other types of properties.

On the other hand, if you are willing to put in a little more labor, a multifamily building may be the best option for you. With a multifamily property, you will generally receive a higher return on investment, but will have to cover more maintenance costs than other commercial buildings.

Miscalculating repair costs

One of the most significant things you need to do before buying a property is determining if and how much maintenance needs to be done on the building. To be safe, you should always assume that minor repairs will be required and remember to factor those costs into your final decision to buy the property. Miscalculating the cost of these repairs could jeopardize your investment and financial situation.

Failing to research the market

Every real estate market is unique and the same goes for commercial properties. By not conducting the proper research, you may overpay for a property or not fully understand the local zoning requirements. Additionally, it is vital to know whether the area where you want to purchase a building is growing or declining economically.

Overspending on a property

Before you research or tour any commercial building, you should know exactly what you can afford in order to stay within your means and increase your ability to make a profit. Knowing your price range can help you avoid making a poor investment and protect your financial outlook in the future.

During the process of searching for a commercial building, there are many pitfalls to avoid. But, you can protect yourself by thoroughly researching the local market, staying within your price range and speaking with a Texas commercial real estate attorney.