GETTING STARTED
Top 5 Mistakes
First-Time Commercial Real Estate Investors Make
BY DREW HOOK
The popularity of commercial real estate has exploded in the last few years, and the media is full of war stories from new investors who find themselves in deals with problems. In almost every case the cause is traceable to a lack of knowledge about a few simple precepts that form the ground rules of successful commercial investments. These are the basic practices that when used correctly will eliminate the most common causes of a bad deal.
1 Ignoring local market conditions
There are two levels of due diligence required to evaluate a real estate investment--the market and the property. And of the two, local market conditions trump everything else.
Every market is different, and a deal technique or property type that is profitable in one market it does not mean the same holds true anywhere else.
Analyzing the demographic trends of population growth, income, and employment in the local market will tell you where opportunity lies, or not. It will also show which property types are in demand, or oversupply. Those conditions will make or break your investment.
2 Inadequate property due diligence
The second level of due diligence is the property condition, including physical items such as building systems, environmental matters and structural components. Just as important are the
38 JUNE 2016 SA Real Estate Investor www. reimag. co. za