If your property investment plan includes commercial real estate, we’re here to tell you the idea can be quite lucrative if, of course, you don’t shoot yourself in the foot first. The point here is that often successful property investing sometimes seems to be a game of attrition. Those that can avoid costly mistakes end up doing all right for themselves. Trust us, this is one area you don’t want to learn through the school of hard knocks because a real world mistake on your first investment plan property purchase can end your real estate career before it ever gets started.
Here are four critical ways to ruin your commercial investment portfolio before it ever gets started.
Don’t Bother Educating Yourself First: Any time there is money to be made, newbie investors tend to get impatient, excited, and leap in with both feet before they really understand what it is they’re trying to do. A lack of education is probably the most common mistake we see in newcomers to the field. It’s not a coincidence that Commercial Investing Center founder Jason Hartman puts a premium on education and maintains a vast collection of free resources for anyone who takes the time to seek them out. If you haven’t been listening to the Creating Wealth Podcast, it would be a good idea to start doing so before dropping a single penny on property investing. Financial independence is certainly within your grasp but so is financial ruin. Do your best to insure it’s the former rather than the latter.
Neglecting to Study Situations: While it’s always to your credit to know the numbers of your investment target houses and properties inside and out, don’t forget to also pay attention to a little thing we like to call “situations.” Think of a situation as a confluence of events combining to create a REALLY motivated seller. Numbers are all well and good and critical to determining whether or not the deal makes financial sense, but at least as important is how badly (and why) a seller is trying to unload the property. Maybe the owner is nearing retirement age and and chomping at the bit to get down to Florida and play golf all day long. Would this be good information to know? Absolutely! Maybe he wants to start his retirement so badly he would be willing to take ten grand off the price in order to sweeten the deal even more for you. Does this make you a bad person? No, just a smart investor. Remember this, investment properties do not exist in a vacuum. Each and every one is part of a situation. Understanding the situation can be the key to profitability.
No Exit Strategy: If you haven’t heard this real estate industry maxim before, let us be the first to mention it to you. You make your profit when you buy. Another way to think about it. Paying too much on the front end of your investment can kill your hope of profiting on the back end. In order to avoid this trap, you must have an exit strategy in place before you ever sign your name on the dotted line. Are you a flipper? Are you going to rent it out? Hold it long term and wait for appreciation? Roll it into a larger property? All the above? Well, actually you won’t be able to flip it and hold onto it for long
term gain at the same time but, hopefully, you get our drift. Know where you’re going with the property before you spend a single dime on it. Your ultimate exit plan and a careful analysis of the realistic profit potential should lead you to a final verdict on what you can afford to pay and what is too much.
Plans and Back-Up Plans: “The best laid plans of mice and men often go astray.” This bit of wisdom was originally written by poet Robert Burns and later borrowed by novelist John Steinbeck. It’s good advice. You would be wise to put it to use in your real estate investing business. Hopefully, your plan is not to wander the streets, knocking on doors, asking whomever answers if their house is for sale. While you might find a completely unexpected deal, in the long run this approach is NOT a good use of your time. Decide in advance exactly how you will approach finding and evaluating properties, then figure out another strategy for when it all goes to hell, because everything falls apart at sooner or later. The secret is to build in redundancy and remember Murphy’s Law.
By paying strict attention to the preceding bits of advice, your property investment plan stands a much better chance to creating the sort of affluent future of which you’ve been dreaming. Are there other mistakes a commercial investor can make? Almost certainly, but avoiding these should get you off on the right foot. After all, you can’t learn everything at once!
The Commercial Investing Center Team
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