Mistakes to Avoid in Commercial Real Estate

Mistakes to Avoid in Commercial Real Estate

Life is full of mistakes and learning experiences, and commercial real estate investments are not immune to these trials and errors. INCO Commercial works thoroughly to ensure a smooth transition and avoid detrimental mistakes, providing guidance and employing our expert knowledge every step of the way. Though we’ll be working hand in hand with you on each deal, here are five things to keep in mind as you make your way through the process.

Don’t Be Afraid to Rely on Your Team

Even with a commercial real estate deal that poses few challenges, the process is still incredibly involved, possibly intimidating, and one requiring a meticulous eye. Having a team like INCO Commercial behind you every step of the way will save you the time, trouble and worry of having to face this process alone or with an inexperienced person. Whether you’re a seasoned investor or just starting out, having expert agents working closely with you will help streamline the process, in addition to ensuring all of the fine print is covered. An INCO agent will work with you to thoroughly understand your requirements and goals for your next investment, and with their extensive knowledge of the local area, will match properties that best fit your needs.

Lack of Due Diligence

The last thing you want to find out after you’ve solidified your deal is that your property has unexpected structural issues, or you’re limited because of zoning restrictions or other land-use regulations, or there are problems with the title, for example. This is why it is extremely important to perform due diligence on the property before committing to a deal. It’s definitely worth the cost in the end to have not only the physical property thoroughly examined, but its history, the survey, down to important documents such as the leases (with any exhibits and attachments), insurance policies, and title policy. For a commercial property with tenants, copies of concessions made to tenants, rent roll, financial statements, credit information and reports from tenants, are just some of the items to review.

INCO Commercial can help you outline the entire process and cover every detail. We realize that proper due diligence can truly help you make an informed decision on the property and help prevent you from dealing with unexpected surprises/expenses down the line.

Awareness of Local Market Conditions

Paying attention to local market performance can give you tremendous insight on the success of your upcoming venture. A great property in an area with declining demographic trends will do little or nothing for you; that’s why it’s necessary to have an overall picture of the property within its context. However, even if you have limited knowledge of the local market conditions, this is where our INCO Commercial agents truly shine. Our compassionate agents possess extensive knowledge and dedication to their fields. We’ll be sure to compare your interests with a particular property to current and projected trends for maximum profits and benefits.

Mis-Managing Finances or Being Overleveraged

Managing your finances to avoid financial disaster sounds like a no-brainer, but it truly requires the meticulous attention of watching each expense or dollar that crosses your business path and making realistic profit projections. After you’ve evaluated your finances for appraisals, surveys and other due diligence-related matters; don’t forget the taxes and closing costs, not to mention any costs for repairs, replacements, and upgrades. Identify what kinds of improvements can be made on the property that could potentially help with the cash flow of your business, and which features could hinder profit.

Make sure you have considered all of the financial figures concerning the operating expenses. Knowing which are hard figures and which are pro forma – even a given CAP Rate could be pro forma – will help with realistic financial projections.

Additionally, if you have other properties, be careful not to over-leverage your investments. It’s common to leverage in property acquisitions, for both beginning and seasoned investors, but again, watch your numbers. Having those real operating expenses from the property’s performance history can help keep your predictions and expectations realistic.

Evaluating Your Risk

If you’re investing in a property where you’re depending on tenants to fill the spaces, there’s always a chance that your tenancy will not fill as quickly as you had anticipated. INCO Commercial will be sure to analyze other similar properties in the area and evaluate the length of time it took for their vacancies to fill. This can help give you an idea of how your property will perform, but remember, each location will obviously have a slightly different dynamic.

Be sure to have a plan in place if your venture is really not panning out as you had hoped. While the ideal is that it’s not necessary, an exit plan strategy provides a safety net for an investment that may not work out. Also, ensuring that there are enough finances to cover a time when an unexpected expense may arise; a major repair, or a tenant vacating sooner than expected. Be sure that your sponsor is able to cover you in a time where you may need more financial coverage than expected; a major repair or a tenant vacating sooner than expected.


These are a few things to keep in mind with your next commercial real estate venture. INCO Commercial will provide you with the assistance you need to close your next real estate deal. Explore our website to view our commercial real estate inventory, as well as our retail and restaurant inventory. Check out our Contact Page to fill out an inquiry or find the INCO phone number and location closest to you! We look forward to welcoming you to our INCO community.