Real estate is one of the most sought after opportunities for investors. However, just like any type of investment, there are always risks that come along with the rewards. While these risks might not be avoidable, there are ways to minimize their impacts. Here are a few ways you can mitigate risks when investing in commercial real estate.

Look at the Current Aspects Surrounding Commercial Properties

There is a right time and a wrong time to get into commercial real estate, as key aspects could change at any time. Making the leap into investing requires not only timing, but also knowledge of what’s at stake.

Considerations such as the ever-fluctuating interest rates, international trade impacts, business owner outlooks, and the overall economy impact commercial properties. When the market is steady and riding high, commercial ventures perform well. However, if the market hits a slump, then real estate sales and leasing activity will inevitably slow. While that may seem like a bad thing, sometimes a slump will lower prices for those interested in starting commercial real estate investments.

Examine a Property’s Risks

When it is time to get involved with commercial real estate, the decision to go forward should always include a comprehensive property examination. Indeed, taking an in-depth look at everything from the past, present, and projected future of the investment property is the best way to minimize potential risks.

• Start by getting a picture of the property’s past. Any report should detail past occupancy, past tenancy, physical failures, and if there are any past foreclosures. While real estate values and property sales are crucial to your decision to invest, knowing of any serious occurrences or underlying issues could also influence your choice. Do a follow up with local news sources for added reassurance.
• Consider the property’s present condition. Closely look at the rent roll and evaluate every tenant closely. Do a thorough review of the financials per year to unearth significant variances and if delinquent tenants exist. Check if there are physical issues that need to be resolved such as roof problems, flooding, mechanical issues revolving around HVAC, plumbing, or electrical? Look at whether it is in a high traffic area or high population growth. Find out the demographic segment in this trade area and if real estate values are appreciating. These stats can give you a clearer picture of the investment potential. 
• Finally, get an idea of where the area is heading in the future. Try to avoid city officials who may provide a positive slant in hopes of drawing in new investments. Instead, let the data do the talking with reports showing clear trends toward growth. Find out how much employment and how many new and approved homes are coming to the area. Also discover if any new projects are under construction which may cause a glut of space, or if a main economic contributor is leaving the market.

Know Your Limitations

Before getting involved in any type of investment, it pays to know what someone can and cannot do. It’s a tricky decision that is much like heading to a roulette table in Vegas. The odds are in the house’s favor, but anyone has a chance if they understand the game as well as their odds of success. For some, their limitations may be more towards high risk opportunities that promise big payouts. For others, an abundance of caution means purchasing long term lease properties with very credit worthy tenants.

Real estate can be a solid investment with the right considerations. Those same considerations are no different when it comes to commercial properties. Knowing the risks beforehand can save investors time, money, and headaches and provide the upside appreciation we all desire with our investments.

Find a Commercial Real Estate Partner in Orlando  

Partner with the commercial real estate professionals at Acquisition Consultants to find wise investment properties to help ensure a healthy return. As your broker, we’ll apply our local market expertise with your needs analysis to compile a list of personalized commercial opportunities. Once you weigh the options and select a property that suits you, our market experts will negotiate the terms to give you the best deal in the long term. To keep the stress out of commercial real estate investment in Central Florida, contact Acquisition Consultants today.