Getting your hands on your first commercial property is a big achievement that deserves to be celebrated, but it’s also important to keep in mind that the real work is about to begin.
Most new commercial property owners have a background in residential property, and as such, can assume that the running of their commercial real estate will function similarly. While there’s overlap between the two, commercial property is very much its own beast — and comes with its own potential pitfalls.
The best way to avoid those potential pitfalls is to be aware of what they are and take proactive steps to manage them head-on. We’ve put together a list of some of the most common, so you don’t have to make the same mistakes as others before you.
Thinking They Don’t Need a Thorough Property Inspection
The idea of conducting a thorough property inspection after closing can seem ridiculous, especially when you completed a pre-purchase inspection and are eager to move forward with other tasks.
But there’s value in undertaking a property inspection once you have the keys. Due diligence checks aren’t as comprehensive as many people believe, and as such, they can miss things that you’d prefer to know about. Committing to an inspection early on can help flag potentially expensive issues while the cost to repair is minimal.
Missing Out On Tax Savings
A surprisingly large number of commercial property owners overpay in taxes, all because they’re unaware of the tax-saving strategies that are available to them. This often occurs because they work with a general accountant, rather than a professional who has an in-depth understanding of commercial property tax strategies, such as how owners can accelerate their tax deductions with cost segregation or defer capital gains via 1031 exchanges. By using these and other strategies, commercial property owners can save significant cash, which they can then reinvest in their properties.
Renting To Any Tenant
There’s a financial pressure to owning a commercial property, and as such, it’s in the owners’ best interests to find tenants for units as soon as possible.
With that said, it’s not about finding tenants, exactly, but about finding the right tenant. Commercial property owners who rent to the first tenant that applies run the risk of making a mistake that can be costly and time-consuming to undo later. It’s much cheaper to lose out on a month’s rent than it is to spend several thousand dollars to evict a bad tenant.
Good tenants make your life easier and boost the value of the investment. Conducting thorough reviews before agreeing to rent a unit is key to making sure that you get the tenants that you deserve.
Taking the DIY Approach to Everything
It’s common for new commercial property owners to try to manage everything themselves, especially if they have a background in residential property. After all, handling things themselves allows them to save on the cost of hiring professionals to do tasks for them.
However, this is often a false economy. Commercial property management is complex, and those who try to handle it themselves often find that they’re spending many more hours taking care of admin tasks than they’d like. Working with professionals early on frees up your time and gives you peace of mind that you’re managing things the right way.
The idea of conducting a thorough property inspection after closing can seem ridiculous, especially when you completed a pre-purchase inspection and are eager to move forward with other tasks.
But there’s value in undertaking a property inspection once you have the keys. Due diligence checks aren’t as comprehensive as many people believe, and as such, they can miss things that you’d prefer to know about. Committing to an inspection early on can help flag potentially expensive issues while the cost to repair is minimal.
Missing Out On Tax Savings
A surprisingly large number of commercial property owners overpay in taxes, all because they’re unaware of the tax-saving strategies that are available to them. This often occurs because they work with a general accountant, rather than a professional who has an in-depth understanding of commercial property tax strategies, such as how owners can accelerate their tax deductions with cost segregation or defer capital gains via 1031 exchanges. By using these and other strategies, commercial property owners can save significant cash, which they can then reinvest in their properties.
Renting To Any Tenant
There’s a financial pressure to owning a commercial property, and as such, it’s in the owners’ best interests to find tenants for units as soon as possible.
With that said, it’s not about finding tenants, exactly, but about finding the right tenant. Commercial property owners who rent to the first tenant that applies run the risk of making a mistake that can be costly and time-consuming to undo later. It’s much cheaper to lose out on a month’s rent than it is to spend several thousand dollars to evict a bad tenant.
Good tenants make your life easier and boost the value of the investment. Conducting thorough reviews before agreeing to rent a unit is key to making sure that you get the tenants that you deserve.
Taking the DIY Approach to Everything
It’s common for new commercial property owners to try to manage everything themselves, especially if they have a background in residential property. After all, handling things themselves allows them to save on the cost of hiring professionals to do tasks for them.
However, this is often a false economy. Commercial property management is complex, and those who try to handle it themselves often find that they’re spending many more hours taking care of admin tasks than they’d like. Working with professionals early on frees up your time and gives you peace of mind that you’re managing things the right way.
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