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Top 5 Mistakes in Commercial Real Estate Investments
Investing in the
commercial real
estate sector is
always rewarding,
however, there are
certain mistakes that
you as an investor
must avoid
committing.
Here are the top 5
mistakes in
commercial real
estate investments
that you should know
about.
Unable to
understand the
local market
This is one of the most
common mistakes
committed by the
majority of the
investors investing in
the commercial real
estate sector.
Moreover, as the value
of a commercial
property is
determined by the
local market
conditions which
make it important to
obtain some local
demographic
statistics before
investing in a
commercial property.
Demographic factors
like existing
population, projected
population growth,
projected job growth &
average household
income are some the
things that affect the
future growth
prospect of a
commercial property.
Too much
importance to
returns
Most of the time it is
seen that investors
always prefer the
commercial property
with the highest rate
of interest without
considering any other
property.
There are four ways to
make money and
higher gains in the
commercial real
estate sector and they
are cash flow,
appreciation, equity
growth & tax benefits.
Due to this one cannot
look at returns alone
as the rate on equity
provides a better
measure of the speed
of wealth creation and
the tax efficiency in
doing so.
Not
underwriting
the current
tenants
Moreover, it is very
important to consider
the financial condition
of your tenants before
renting them the
commercial property.
If you are leasing a
large part of your
commercial property,
then you must compile
all the data of your
various tenants who
are working in
different sectors &
categorize them on the
basis of their job
profile.
This will help you in
the long run like if a
particular industry is
facing financial
instability, then the
tenants who are
working in that sector
will face problem in
paying rents.
Not
bankrolling
the sponsor
Just as it is important
to understand the
local market and
ensuring the
commercial property,
you should also
bankroll the sponsor
of your commercial
property.
Moreover, you must
also look at the way
the previous deals
which have been
finalized by the
sponsor are turning
out presently.
It is also equally vital
to make sure that the
sponsor is not
involved in any
litigations and has not
been sued by any
previous investors.
Not
understanding
the risks
It is a well-known truth
that investing in the
commercial real
estate sector is
fraught with many
risks and as an
investor, you should
be aware of all these
risks.
The sponsor of your
commercial property
should disclose all the
risk factors involved in
the particular
commercial property
in which you are
investing.
Furthermore, it is
important to not only
review the risk factors
in the commercial
property but also to
understand the risks
of this type of
investments.
http://www.martinlandis.com/
https://twitter.com/_martinlandis
THANK YOU

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Top 5 Mistakes in Commercial Real Estate Investments

  • 1. Top 5 Mistakes in Commercial Real Estate Investments
  • 2. Investing in the commercial real estate sector is always rewarding, however, there are certain mistakes that you as an investor must avoid committing.
  • 3. Here are the top 5 mistakes in commercial real estate investments that you should know about.
  • 5. This is one of the most common mistakes committed by the majority of the investors investing in the commercial real estate sector.
  • 6. Moreover, as the value of a commercial property is determined by the local market conditions which make it important to obtain some local demographic statistics before investing in a commercial property.
  • 7. Demographic factors like existing population, projected population growth, projected job growth & average household income are some the things that affect the future growth prospect of a commercial property.
  • 9. Most of the time it is seen that investors always prefer the commercial property with the highest rate of interest without considering any other property.
  • 10. There are four ways to make money and higher gains in the commercial real estate sector and they are cash flow, appreciation, equity growth & tax benefits.
  • 11. Due to this one cannot look at returns alone as the rate on equity provides a better measure of the speed of wealth creation and the tax efficiency in doing so.
  • 13. Moreover, it is very important to consider the financial condition of your tenants before renting them the commercial property.
  • 14. If you are leasing a large part of your commercial property, then you must compile all the data of your various tenants who are working in different sectors & categorize them on the basis of their job profile.
  • 15. This will help you in the long run like if a particular industry is facing financial instability, then the tenants who are working in that sector will face problem in paying rents.
  • 17. Just as it is important to understand the local market and ensuring the commercial property, you should also bankroll the sponsor of your commercial property.
  • 18. Moreover, you must also look at the way the previous deals which have been finalized by the sponsor are turning out presently.
  • 19. It is also equally vital to make sure that the sponsor is not involved in any litigations and has not been sued by any previous investors.
  • 21. It is a well-known truth that investing in the commercial real estate sector is fraught with many risks and as an investor, you should be aware of all these risks.
  • 22. The sponsor of your commercial property should disclose all the risk factors involved in the particular commercial property in which you are investing.
  • 23. Furthermore, it is important to not only review the risk factors in the commercial property but also to understand the risks of this type of investments.