Commercial real estate investing, like any new venture can be quite beneficial but also come with a number of risks. Some of which can take some time, persistence, and patience to overcome. If you’re new to commercial real estate investing or are considering on making the shift over to the CRE side, you’ll want to consider some of the risks that come along with being an investor.
What new investors must understand is that there will be risks and you have to be willing to make them in order to really succeed in the commercial real estate industry. Just to give you a glimpse of what to expect, we’ve put together a list of things you’ll encounter when you’re just starting out in CRE investing.
Lack of Knowledge
One of the biggest mistakes any commercial real estate investor both new and experienced can make is not being informed about the market, the process, and sadly the basics of CRE. Much of the time investors tend to jump in head first before really taking the time to study the property at hand, but most of the time even the basics of commercial real estate and studying the current market.
Unlike residential real estate, commercial real estate requires a quite a bit of capital from the very start. Location, size, property type, and the economic environment also play a hand at the price of a commercial property. If you lack the funds from the very beginning, it makes it difficult to get your foot in the door of the commercial real estate investment field.
Commercial properties unlike residential properties take much more time to see through. Residential properties at times can be listed and sold within a few weeks, commercial properties are a much higher risk and a big investment for others, that at times can take anywhere from months to years before you find a tenant willing to take on that risk as well. You’ll have to really prepare yourself for the time and finances that will be spent trying to renovate and maintain a commercial property.
In general investing in anything is quite risky. A lot of time, new investors want to begin investing in large and expensive properties when they should really slow things down. When you’re beginning your CRE investing career the best thing to do is to invest small. Investing in smaller properties reduces the already high risk associated with investing. Building your portfolio takes time and investing in smaller properties will help you build your way up to those multi-million dollar properties.