Truth #1 about commercial real estate investing
A shrewd man once stated, " The season of failure is the best time for sowing the seeds of success." So how does this relate to commercial real estate investing? When the real estate market is in a downward trend is when you plant your seeds of success. The individuals who purchase when every other person is selling generally end up the winners. This is valid for a wide range of investing and is particularly obvious with commercial real estate.
Truth #2 about commercial real estate investing
Be that as it may, the end-product of this reality is sadly true. It's during the good times that investors sow their seeds of failure by acting like the good times will keep going forever they make poor investment choices. They forget the bad times and the lessons learned.
Potential seeds leading to failure
1. Instead of firmly staying with your offer you become involved with the purchasing furor of rivaling different proposals on a similar property.
2. Not being worried that the property doesn't bring income with current leases and expenses.
3. Assuming rents will keep on going up as they have before.
4. Assuming that property assessment in a few years will rescue you from purchasing today’s overpriced property.
5. Under assessing the number of repairs expected to restore the property to an adequate physical condition.
6. Not having adequate money on hands to withstand a downturn.
7. Loading your property with debts. Indeed, even with low-interest rates, it is not a sensible thing to do if it gobbles up the property's cash flow after debt obligations.
So how would we dodge these traps?
1. Do a check on your investing expectations
With each investment opportunity ask yourself whether your expectations are too aggressive. Do they depend on an idea that would have worked in the past when the market was picking up steam, but may end up being over the top because the market is starting to peak? You don’t want to be left with an over-priced property.
2. Leave behind your feelings
Check and re-check your investment expectations. Are they reasonable? On the off chance that you think they are, at that point certainly leave when the offering war turns crazy.
3. Abstain from utilizing modern valuation strategies
Modern valuation strategies do investors a disservice. A method that comes up with a large number of questions that nobody knows the responses to. For instance, do you know what amount of rents are going to increment every year? How long will you keep the property or the amount you will sell the property at? The response to every one of these questions is a categorical no.
4. Where is the market at now?
With our current economy at a standstill with COVID-19, commercial real estate opportunities will arise for investors to increase their portfolio. It will certainly be an investors’ market out there.
Contact Target Realty Corp. to discuss your next investment acquisition – or your next owner-user property! Our commercial real estate pros are here to guide you through the process of finding to buying your next property!
Opinion of Value