Taking the Failure Out of Commercial Investing

There are three main reasons novice investors fail in commercial investing: inaction, being cheap, and doing deals that shouldn’t be done. I can’t tell you how many times I hear young investors tell me the reasons why they haven’t reached their goals. Well, it’s time to get out of the slump of wrong thinking and doing what it takes to make this year your best investing year ever. Think of it this way, even if you do only one deal this year, that’s one more than you did last year and basically, that’s a huge financial improvement.

Get Over In-actio

You’ve been learning the ropes and studying deals. You may have even written some offers, but you find something wrong or something that you feel you need to research further and ultimately, the offer never gets submitted. That is what I call inactivity. No matter which way you dice it, education and research is important, but it’s not the thing that lands you deals.

Now here’s how I define activity – submitting offers. Submitting offers is the only way to land deals. I find many new and would-be investors often fear making a mistake and committing themselves to what is probably the largest financial undertaking of their lives. What you should know is that you’re not really committed yet. Submitting an offer can easily be done by submitting a Letter of Intent to Purchase. This is not a binding offer; it’s just a door opener which shows that you’re a serious buyer. The next step is negotiations.

Get over in-action by making offers and engaging in the process of negotiations.

Being Cheap

Many new and would-be investors make the mistake of doing things they should leave to the professionals. For example, many try to save money on property inspections, property management, legal counsel, and realtors by taking on these responsibilities themselves. No matter how many deals I’ve done, I don’t consider myself to have the credentials and expertise that these professionals do. In fact, I make these professionals a part of my team and I benefit from their experience and knowledge.

I also don’t scrimp on maintenance and repairs. I train my property management company to jump on tenant issues as soon as they arise. Why? Tenants leave because maintenance issues aren’t addressed. I also train my team to be proactive in taking care of property wear and tear like painting, buildings and grounds maintenance and any other issues that affect the image of my building.

Cutting corners like these will not only cost you, but it will also zap you of any time and energy you have left to do other deals.

Doing Deals that Shouldn’t Be Done

Many young investors also believe that just because they’re making money on a deal, then the deal must be good. That is far from the truth! These deals are called marginal deals – anything less than 10% cash-on-cash. There are also commercial property owners and realtors that will tell you that making more than 10% is virtually impossible in the area you’re thinking of. While that may be true, be conservative and look for other deals.

Cash is king in the real estate industry but that cash has to come as a result of making calculated risks based on the property’s actual performance; not based on what might happen. You may already have heard horror stories of previous so-called investors jumping in on a deal based on what will happen. Don’t get me wrong. There are many speculators who do make money and lots of it, but that’s not the kind of deal that many can tolerate financially. My point is to invest in commercial property based on it’s actual performance; not based on what you think or you’re told might happen – the key word is “might”.

Taking the failure out of commercial investing comes as a result of setting specific ground rules for yourself as an investor. For example, there are three basic things that new investors should be careful to avoid: in-action, being cheap, and doing deals that shouldn’t be done. Avoid these activities and make this year, your best investing year ever.