Real Estate Investment Mistakes
Unfortunately, real estate investment mistakes are common among both seasoned and novice investors. Involved in thousands of real estate transactions for over 20 years, there are many of the same mistakes that I see over and over again.
Other than over paying, here are some of the most common real estate investor mistakes that I’ve seen with commercial real estate:
- Passive management – Whether we like it or not, property management takes work. An owner needs to either hire a competent property manager or commit to spending the time and energy to maintain and improve their investment. Properties that are ignored will deteriorate. Owners shouldnt wait until the problems get beyond control to deal with them. Roofs, HVAC systems & parking lots all last longer with proper maintenance. If you wait until the roof is leaking or the HVAC system breaks down, you’re making a costly mistake. Parking lots need to be kept clean. Landscaping needs to be maintained. Owners can’t just assume that if nobody’s complaining, everything is going well.
- Tenant relations – Owners need to know how their tenants are doing. If a tenant is struggling because of lack of parking, poor property maintenance or conflicts with other tenants, the owner needs to be aware of what’s going on. Very often, these problems are solvable. If a tenant is successful, they can pay rent. If a tenant fails, they can’t.
- Vacancy & Delinquency – In most real estate deals, the difference between the owner making money and losing money is collecting between 80-100% of the properties potential income. If vacancy & delinquency is at 10%, that could represent 50% of the owners profit. If there are delinquent tenants, owners need to make some very tough decisions and either get their tenant to pay or leave. Vacancy needs to be marketed very aggressively and you need to place the right tenant. By the right tenant, it needs to be a tenant that will pay on time and be good for the overall building. Owners need to consider the mix of tenants to make sure that they complement each other, or at least don’t conflict with each other. A bar might be a great tenant and AA might be a great tenant, but they probably wouldn’t want to be neighbors.
One wouldn’t buy a business and assume it’s going to run itself without a manager. The same is true for real estate.
Ari Miller at Real Estate Management Advisors, LLC has over 20 years experience in all aspects of investment real estate.