Commercial real estate is along-term investment; however, several challenges exist for those looking to get into the game as newcomers. Therefore, to perform well in the long-term and generate a significant ROI, it’s important to take note of some important challenges and take the necessary steps to overcome them.
Ensuring a Solid Financial Background
Qualifying for commercial financing on your commercial real estate is quite difficult and varies greatly from investor to investor. To close a good deal on your initial mortgage, it’s important to have a solid balance sheet backing you up. An investor showing promise in terms of a steady income and well-managed budget will get you on the high road towards getting your mortgage applications accepted. Therefore, avoiding irregular mortgage dues, ensuring your profitability and your ability to mitigate losses is essential in showing off your financial abilities and potential as a commercial real estate investor.
Lack of Experience with Commercial Real Estate
If you’re a newcomer to the commercial real estate front, it’s hard to show experience when closing big deals, however, partnering up with fellow investors in the same commercial real estate class can help you land those deals. As another option, hiring a renowned property manager can help serve to makeup for your lack of experience and increase your chances of closing a good deal.
Asset Liquidity
Acquiring new property requires a lot of liquid assets to be handed over fairly early on into the investment. Therefore, ensure that you plan financially to pay the down payment, renovations fees and other associated costs through liquid assets. Experienced investors recommend that having liquid assets when starting up as an entry-level commercial real estate investor makes it more likely for you to close deals and get better value as well. Therefore, it’s necessary to get sufficient assets liquified, as assets that cannot be used quickly often bring down your chances of winning a good bid.
Not Paying Due Diligence
Making poor investments as a starting commercial real estate investor can set you back or even financially ruin you. Therefore, pay due diligence when you take on a new bid and ensure that your research is thorough and solid.
Doing your homework and understanding the true value of the property you are about to invest in, including its sale history, class, and more importantly surrounding demographic and location are key factors that impact the value of the property in the coming years. This type of foresight can help you mitigate potentials losses in the long run before you even invest in the property. Considering these crucial challenges, it is important to remember that, as a novice commercial real estate investor, getting into the game alone will only lead to pain for you. Therefore, get yourself a solid team to help you out with all the pain points. That is, hire an excellent real estate attorney to handle all legal matters. From there, throw in a property manager to take some load off you as you go on investment runs and finally a skilled contractor, with a license to help you manage your commercial real estate easier.
