Property investing is easy but being a successful property investor is another story. It takes patience, perseverance, and most importantly, a good plan. However, there is good money to be made, so long as you do your due diligence, have a good strategy and know when to ask for help.
Here are the top five mistakes to avoid if you want to see good returns on your investment and ensure your commercial property investment strategy succeeds:
Mistake No.1 Making an emotional decision
Just like residential property investment, it’s important to keep your emotions out of your decision making process. Whether it’s a property has a nice ‘feel’, whether you have great memories of the location or whether you are drawn to the look of the place will have no bearing on whether it will make a good investment or not. If you are going to fall in love with anything, fall in love with the numbers, because it is the numbers that tell the real story.
Mistake No.2 Not doing enough due diligence
This seems obvious but time and time again, bad decisions are made based on inadequate or unsound research. Taking the time to explore all the legal, financial and technical considerations will help you identify potential risks and decide if the investment is sound. Your commercial property agent, local council, lawyers, engineers and building inspectors all hold pieces to the puzzle but it’s up to you to complete the picture, based on your unique requirements and goals.
Mistake No.3 Not thinking about your tenants
Another common mistake is not understanding what your potential tenants and their customers want. Most important is the location; for example, the amenities, demographics, transport, zoning and environmental factors. Also important to potential tenants is the space itself – size, layout, fit-out, flexibility, facilities and services. There’s absolutely no point investing in a large warehouse space in an area suited to small retailers – tenants will be extremely hard to come by, and an empty commercial property bleeds money.
Mistake No.4 Not negotiating hard enough
Finding the right commercial property investment takes time. Patience is important so you don’t end up overpaying due to pure frustration, because overpaying now can have serious implications further down the track. And remember, just because the bank will lend you the money, it doesn’t mean that’s how much you should pay. Another common mistake is thinking that price is the only negotiable. Talk to your commercial property agent about what else could be negotiated as part of the deal.
Mistake No.5 Thinking you can do it all yourself
The most successful commercial property investors work as a team. The members of the team include, but are not limited to, a real estate agent/broker, a property manager, a banker/lender, an accountant and a solicitor. These people will act as your advisors, your conscience, your voice of reason, your protectors and your sounding board. And remember, it’s not just about making up for your weaknesses; it’s about making good use of the skills of professionals. If you gather the right team around you and help them to understand your goals, they will work hard for your success.
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