When used correctly, a commercial real estate loan is a valuable asset for your company. Extracting that value requires your company to avoid some common investing pitfalls, however.
Any commercial real estate investment comes with some degree of risk. That risk can be minimized, however, with careful planning and meticulous attention to detail by the investors. This goes double when financing property with a commercial real estate loan. The success of these investments depends entirely on how much preparation and research your company puts into the evaluation and financing process. Any failure in due diligence could significantly compromise the long-term return for the investment.
In fact, there’s a long list of ways to undermine this process, either due poor execution of company policy or mediocre employee performance. The best way to avoid these common pitfalls is to anticipate them and prepare a response. These examples illustrate how easily the most critical details regarding commercial real estate investments can slip through the cracks:
● Planning for investments without the details - This seems like a no-brainer, but you’d be surprised at how many real estate asset strategies comprised entirely of broad goals and strategies. You’ll want to generate a detailed, actionable business plan for your investment before you even think of visiting with lenders. The more detailed your plan, the more confident a lender will feel about approving your commercial real estate loan.
● Failing to check all your lender options - There are plenty of times where relying on tried and true professional relationships is a great way to save time and money. Taking out a Texas Commercial Loans to finance a real estate asset is not one of those times. Traditional banks and lenders may not offer terms that compliment your project timeline, for example. Be sure to evaluate private lenders who specialize in commercial loans to compare a wider selection of terms.
● Making investments based on gut-reactions - A shocking headline or news network hot take are not good reasons to make a commercial real estate investments. Taking a gut-reaction approach to commercial real estate is akin to making large investments in gold at the insistence of a cable television infomercial. Make sure your company’s next real estate investment are always based in observable patterns and hard market data rather than a personal whim.
● Valuing property without comparing similar deals - Even when working with a trusted, professional lender, it’s still best to do your own digging. Looking into sales comp information can give you an idea of how much similar buildings in area have sold for in the past few years. This due diligence provides your company with extra leverage when negotiating terms with a lender.
Make A Sound Investment By Using Every Resource At Your Disposal
It’s impossible to expect the unexpected, but your should certainly give it a try when it comes to making a major real estate investment. The best way to predict as many outcomes as possible is to leverage as many expert perspectives as possible.
Lending professionals familiar with commercial real estate loans are your best bet for flexible financing and helpful insights.
In addition to providing access to financing that fits your company’s long-term strategy, an experienced private lender can share their perspective as a specialist in the industry. Incorporating this input will only increase your company’s chances of making a sound real estate investment.
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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