Fielding Investments knows that the commercial real estate industry can oftentimes be confusing and hard to understand. With so many terms, equations and so much money, it can be easy to make a mistake every once in a while. It is for this reason that the experts at this leading commercial real estate investment company have taken the time to share three mistakes that are commonly made and how they can be avoided.
- Failing to do one’s homework on a property.
When considering commercial real estate investment, it is of the utmost importance to do intensive due diligence. There are many different things that need to be considered including, but not limited to: the physical condition of the property itself, zoning, land-use, insurance, financing, tax laws, environmental conditions and so much more. Without the guidance of a seasoned veteran in the industry, beginners can be at great risk.
- Borrowing too much.
Few investors will have enough money to pay for the full investment of the property on their own and even if they do, it is usually not prudent to invest in one asset alone. Oftentimes, commercial real estate investing firm Fielding Investments suggests that first time investors seek partners with whom they can share risk and avoid seeking too much leverage for their purchase. While seasoned professionals do tend to borrow a significant portion of many acquisitions, they do so only after having established credibility with the credit markets, thereby allowing them to borrow a non-recourse basis (the investor does not personally guarantee the full borrowings, generally only being responsible for traditional “carve-outs”).
- Not knowing one’s market.
Perhaps the biggest mistake that investors make is not doing enough research and, therefore, not fully understanding the intricacies of that specific market. Fielding Investments has always maintained that individuals should invest in properties in their immediate area, because they have inside information that simply cannot be gained by virtually any other method. By living and working in these communities, investors can become knowledgeable about developments and plans for parts of the community including any efforts that are being made to improve specific areas with better roads, sewer and water infrastructure, and any new developments that are being considered. This gives investors a real advantage over out-of-state commercial real estate buyers.