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How to Avoid Common Commercial Real Estate Investing Mistakes

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How to Avoid Common Commercial Real Estate Investing Mistakes

Avoid common commercial real estate investing mistakes: Using hard money loans for commercial real estate investments is a great idea but it can be difficult to navigate the market. If you are interested in investing, you should learn how to avoid common commercial real estate investing mistakes.

Due diligence

It is incredibly important to evaluate the property and the market where the property is located. You can look at comps in the area in order to determine how much the property is worth. Even if the property looks great, if it is in a bad market, it would be a mistake to invest in it. Make sure that you analyze the demographic trends including growth, income, and employment.

Do the math

When it comes to real estate, the numbers are incredibly important. The investor must be able to evaluate the net operating income and gross revenue minus the operating expenses. When applying for a commercial hard money loan, you will need to make sure that all of the math is correct in order for the lender to help determine which loan would be best suited for you. Projection and guessing doesn’t help when it comes to real estate investing. Hard money lenders value transparency and you will be rewarded for applying with an accurate and structured investment plan.

Exit strategy

There is risk with every investment and you should always be prepared for the worst. This means that an exit strategy is necessary. A proper investment plan should include a plan for the worst case scenario and it will show the lender that you’re serious. You should also include in your application how the property will be managed, any maintenance costs, how long any repairs will take, how to get out if things take a turn for the worst. Hope isn’t a plan. It is important that you have multiple exit strategies and that you know your plan inside and out.

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