Commercial real estate investments offer multiple benefits, including property appreciation, monthly cash flow from rental income, and tax benefits. These investments also typically have lower risk than securities, stocks, and other money market investments. However, there are several mistakes that many people make on their first commercial investment. These are tips to help you avoid them.

Failure to Plan

Before you start your real estate investment journey, you need a plan. You should have short- and long-term goals and a solid budget. You need to develop an exit strategy for selling your properties. Set your expected rate of return. Determine the types of properties you are interested in and where you want to invest.

Focus on your goals as you create your investment plan. Then, follow your plan carefully as you search for and purchase properties. Be patient if you don’t find what you are looking for right away.

Lack of Knowledge

Commercial properties have different jargon, requirements, and strategies than residential real estate investments. You need to learn about the industry, conduct in-depth research on the local market and find out about current trends. Learn what properties are providing the highest rate of return. You also need to understand the ratios and financial calculations necessary to properly evaluate your investments.

Not Building a Team

When you start your real estate investment journey, you should build a team. First, find an experienced mentor who can walk you through the process. Work with this individual for several months before you start looking for your first investment, and ask if your mentor will help you with your first purchase. Then, you need to add a reputable realtor, mortgage broker, tax accountant, real estate attorney, and contractors to your team. You may also build a team of like-minded investors who will share your risk and the cost of the property.

Mismanagement

If you don’t want to manage your properties yourself, you need to hire a property management company. However, you should do your due diligence and find the best, most reputable company available. The right company can increase your cash flows, lower your risk and increase your property value. They have the experience necessary to keep your tenants or find new ones quickly. They also ensure that your property is properly maintained. These companies may also suggest features or amenities that could increase your income.

As you prepare for your first commercial real estate investment, consider these mistakes, and take steps to avoid them.