Commercial Real Estate: Five Common Mistakes New Investors Make

You have to make sure when you are just getting started in the commercial real estate field that you set yourself up properly. You are going to make mistakes in this business, but you have to learn how to think on your feet and bounce back.

Commercial real estate can be a tough area to begin a career in. Anything could go wrong at a moment’s notice. The carpenter that you originally made a deal with may decide that the quote he sent you was not enough to cover the work agreed upon. You could have been misled to believe the family home that looks ready for a quick turnaround now needs thousands of dollars in repairs and refurbishments. Quick thinking and due diligence will become your best friend, however, you will still run into some headaches.

One of the biggest mistakes that novice investors run into is misjudging the market. Three words could make or break your business: supply and demand. The most successful entrepreneurs are people that see a need in the market. Once they figure that out, they figure out multiple ways to fulfill that need for their customers.

For example, if you find that your city is having an increase of entrepreneurs or small business owners you could invest in co-working spaces. Looking for the census records of the city you are in can yield a lot of answers. Things like average household income, the amount of people that are moving to the city or the rate of employment are great indicators of the market conditions.

Most experts will tell you the best way to succeed is to follow the numbers religiously. You always want to make sure that you are able to accurately figure out how much profit you will make off your investment. You do not want to spend a lot of your career just breaking even. Make sure you calculate every expense that you may incur over the entire process. At the end of your deal you do not want to find out that you have another expense that puts you the hole. That being said you do not want to forego certain repairs or enhancements to save money here and there.

Everything in the commercial real estate business ties in together

You have to remember that many mistakes usually have a ripple effect. The contractor you forget to schedule today cannot make the repairs before the inspector checks to see if the house is up to code. Another thing people new to the business may do is overextend their loan. What we mean by that is borrowing too much money from lenders when investing in a piece of property. If the value of the property does not exceed or at least match the price you are asking for you could end up owing a lot of people a lot of money.

When things get a little hectic during commercial real estate business sometimes you have to fold

When in doubt know your way out. There is a thing called scope creep. This is when the general scope of the deal or flip that you want to do gets more complicated, or has much more work than anticipated. Many beginners feel as though they can force a deal to go their way, however, it may be more beneficial cutting your losses and finding a better investment.

Dennis Dahlberg Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:      (512) 516-1177 
Dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027

111 Congress Ave |Austin | Texas | 78701    

   

About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.