Commercial real estate investments represent profitable opportunities for your company. Put your commercial mortgage to good use by avoiding these common investing errors.
While the industry is constantly changing, commercial real estate is demonstrating strong performance across all sectors (excluding industrial). That means there’s no shortage of opportunities for companies interested in owning or redeveloping a valuable real estate asset. If this is your company’s goal, it’s important to do as much of your homework beforehand as possible. Why the focus on prep work? That’s because there’s a long list of pitfalls lurking in wait for first-time investors.
If your company wants to fully leverage its commercial mortgage, the more planning you put in the better. This overview of common hurdles illustrates some of the easiest traps you could fall into your first time playing the commercial real estate game.
● Missing Important Property Details - A high degree of due diligence is an essential quality in any successful commercial real estate transaction. Failure to analyze every detail of a property before committing funds from you commercial mortgage can result in gross misappropriations of capital. That’s why it makes sense for your company to put sufficient manpower and resources into evaluating every last inch of a building before making an investment. Failure to do so could result in catastrophic consequences and huge costs down the road.
Additionally, it’s up to investors to research the surrounding area potential investment properties to the best of their ability. Understanding which local business are successful, why nearby property types are thriving and the type of regular foot traffic in the area provides massive advantage when analyzing the potential value of a real estate asset.
● Not Investigating Local Policy - Local authorities can throw all manner of monkey wrench into your company’s commercial real estate strategy. None of this is intentional, but it is critical that companies brush up on local and regional commercial real estate policies. For example, some cities have laws controlling the conversion of properties from one business type to another. Knowing this information beforehand would be extremely important if local policies prohibited such redevelopments.
Getting access to this information may be easier said than done. Your company may have to reach out to local authorities or invest manpower into reviewing the public records in-house. Regardless, the advantages of brushing up on local building policies is impossible to ignore.
● Ignoring Alternative Lending Options - If your company is new to commercial mortgages, it might seem like an obvious choice to approach a bank about funding your property investment. However, limiting your search to traditional lending institutions may prevent you from finding a loan that best meets the terms of your project.
Don’t Assume Banks Will Offer The Terms Your Business Needs
Banks are rigid in their lending, locked into offering certain terms to certain customers by corporate policies. If these terms conflict with the needs of your company, feel free to seek capital from another source.
Working with a local private lender has numerous benefits for first-time investors.
In addition to providing ideal loan terms and a quick application turnaround, private lenders can help introduce first time lenders to the nuances of putting a commercial mortgage to good use.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@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.
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