06 Oct What are Common Mistakes Made by Experienced Real Estate Investors?
1. Failure to understand and utilize the balance sheet
The fours ways to make money in real estate are cash flow, appreciation, equity growth, and tax benefits. Of these, only cash flow is shown on the operating statement. You must turn to the balance sheet to make yourself aware of the other three. The balance sheet needs to be managed to make the best use of assets. If you are unfamiliar with a balance sheet, or uncomfortable with its use, sit down with your accountant and get a good grip on how this tool can help you manage your commercial real estate assets..
2. Not being willing to end a deal or partnership
Every commercial real estate transaction comes with its share of challenges. With every partnership comes disagreements and discussion. However, when either of these gets out of hand, you must be willing to call it a day and end the deal.
It takes a certain amount of sense and experience to be able to spot when a deal is just going to continue to get worse or when a partnership is just going to end in misery.
Don’t look for trouble, but be willing to notice when it’s chewing on your ankle.
3. Swinging for the fences when you should be happy with a single
Commercial real estate investors, even those with plenty of experience can make the mistake of looking for deals that require more capital or more expertise than that individual possesses. The best way to approach it is to start making those deals you are comfortable with while you work toward your bigger plans and that commercial real estate home run.
4. Getting on the treadmill of over-purchasing
As a commercial investor, you can get yourself into the situation of having more properties than you have cash on hand to take care of all the expenses involved in ownership. If you are having to use the gains from one property to cover the losses on others, and not quite making it, then it’s probably time to let go.
If you have multiple properties and are using the gains from some to cover losses in others and losing the battle, it’s time to get off the treadmill, despite the temptation to hang on.
Go through your real estate portfolio and identify those properties that are the biggest drain. Get rid of them. Then focus your energies on those properties that are producing well for you.
5. Not basing purchases on the local market
All real estate is local. What is happening on the national scene may have some bearing on local market fluctuations, but all that really matters to you when buying or selling commercial properties is what’s going on right there, in the neighborhood. Are property prices on the rise? Is the neighborhood getting better, more conducive to business? How are rental occupancy rates? What is the competitive space supply and what are the population and demographic trends? Is there a job growth right there in that area or is it on the decline?
Know these factors about the local area and you will make the wisest commercial real estate decisions.
Whether you’re interested in buying, selling or leasing in the Northeast Los Angeles area, give me a call and I can help guide you through the process and help you avoid the pitfalls and errors that are a natural part of real estate transactions.
“Let us help you make an informed real estate decision on your next transaction. Whether you’re buying, selling or thinking of leasing commercial space or just have a few questions that need immediate answering, give us call. We are here to help you make the right move”.
Mike Tolj (323) 258-4946