Top 4 Things People Forget When Purchasing Investment Properties
harkins / June 20, 2018
Buying a commercial property as an investment is a vast undertaking. It is no surprise that so many people, when faced with such an array of unfamiliar tasks, tend to make a mistake or two. The important thing for any investor is to not get overly upset. Some errors are always going to occur, and the important thing to do is to maintain one’s investments in such a way that they are not constantly at risk or personally stressful. With that in mind, here are four major issues that commercial investors tend to overlook.
The first is a thorough inspection. Commercial properties have the tendency to be vast, to have been used by a large number of tenants in the past, and to have incomplete records. The only way to remedy this is with thorough inspection. Inspection should happen on every level, at multiple times of the year, and on the most thorough basis possible. It is not unreasonable to go as far as to resurvey the property, nor should it be surprising that have the same area inspected more than once.
A thorough inspection can reveal what the structure will truly need. Some properties will need to be razed and begun again. Some properties can be repaired and brought up to the desired condition. Once this is known and the decision has been made, many property owners will tend to underestimate their costs with renovation or new construction. There is no reason to be optimistic when addressing these numbers. Commercial property investment is a long-term proposition, and any small piece of luck at one moment will more than likely be counterbalanced by an unforeseen event at another time. Experience property owners are not just cautious with their estimate of repair cost and construction cost; they are positively pessimistic. Always maintain cash reserves for emergency repairs.
Finally, commercial property investors can overlook the importance of their funding. Paying for the investment is not a one-time proposition, and commercial property can be so expensive that repair and renovation and new construction can equal the purchase price. It is better to have a long-term source of solid funding than it is to get a lump sum and hope that nothing goes wrong. Most importantly, one should never invest in a property that is outside the budget on the theory that more funding will appear.
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