U.S. ? (realtybiznews.com) Every real estate investor, whether they are working in the residential or commercial markets, wants to minimize the risk of losing money on their investments. There are certain safeguards you can take to accomplish this goal but no investment can totally be made risk free. You want to avoid the obvious oversights. Here are some things every commercial real estate investor should do to help avoid costly mistakes.
Conduct your Due Diligence
Due diligence is the process you go through when verifying the financial documents of the property, performing a physical inspection, and checking out the legal aspects of the property such as the status of the title. Over ninety percent of all commercial real estate deals die during the due diligence process. Normally because some statement of fact about the property the seller made to the buyer turns out to be either untrue or exaggerated.
So failing to do your property due diligence can be very costly. You may end up buying a property that?s a money pit. However, when done correctly, due diligence can help you avoid certain risks.
Don?t overpay
This seems simple enough but overpaying is very common among new commercial real estate investors. If you are buying apartments, make sure you are aware of what price you are paying per unit. If you?re buying a shopping center, make sure you know how much you?re paying per square foot. In both cases see what the recent market closings value your property at and get good comparables.
Paying too much will lock up the property?s cash flow for a long time and prevent you from making future investments due to a lack of liquidity?
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Source: http://www.rednews.com/index.php/2012/08/minimizing-risks-when-investing-in-commercial-real-estate/
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