A severe drop in property values has caused many small business owners to be skeptical of investing in commercial and industrial real estate. Some do not believe that property values increase over time, which causes them to shy away from investing in commercial and industrial real estate due to the unpredictability of the real estate market. Yet, the current market challenges are creating an ideal time to purchase commercial and industrial real estate. The commercial and industrial and industrial real estate opportunities available to small business owners commercial and industrial warrants an analysis of why business owners fear real estate investment.
Why Is There a Fear of Real Estate Investment?
Fear in commercial and industrial real estate investing is reasonable. The risk of losing money can be real.. What if a tenant does not pay rent? What if a partnership does not work out? The most useful thing a prospective investor can do is acknowledge that fear, confront it, and not allow the fear to hold you back from a potentially successful investment. Fear can be paralyzing for some. Fear of real estate investment can keep people from realizing their dreams.
Fear of Losing Money
The fear of losing money is probably the biggest fear of commercial and industrial real estate investment. The amount of cash required by an investor can act as a good enough reason not to want to risk losing whatever amount of money they have to spend on a property that does not have a 100% guarantee of success.
You can overcome that fear by finding professional help to test your assumptions and then trust the numbers. We believe every real estate investment decision needs to start with a positive answer to this question, “Is there demand today and in the coming years for the property you want to invest in?” If the answer is NO, then stop. If the answer is YES, then complete your due diligence on the market.
This includes researching the neighborhood or similar commercial and industrial building sales in the community and find out the average rent price, selling price and vacancy trends. After gaining an understanding of this information, then create your financial analysis and ask yourself the following:
- Is the cost of the commercial and industrial real estate property low enough to market a decent return rate?
- Will you have positive cash flow each month or how long will it take to get to this point?
- How much will it cost to carry these vacancies before you arrive at a positive cash flow position?
Answering these questions can help you overcome that fear and help assure you investing the right commercial and industrial real estate properties.
Developing a positive mindset comes with strong underwriting. Underwriting helps overcome your fear of losing money. Investing in commercial and industrial real estate can become a good source of additional income and broaden your investment strategy.
Fear of Making the Wrong Decision on a Property
Fear of whether a property is a lemon or not picking the “right” property is also a challenge of commercial and industrial real estate investment. Don’t fear making a mistake. The reality is, you will make some mistakes! If you complete your in-depth due diligence, mistakes won’t happen as often. View these mistakes as opportunities to learn. What you learn will help you with future commercial and industrial real estate investment properties.
For most of us, the perfect real estate endeavor won’t come to you, you have to seek it out. Many commercial and industrial real estate properties available for investment exist, but finding the right one usually takes some time and persistence. The chances that one property will match all of your boxes are very slim when you begin your investment property search.
Fear of Inexperience
If experience were a requirement before starting anything new, we would all be in trouble. Often, we are fearful of what we don’t know. When we don’t have all the information, fear causes us to make assumptions, and we sometimes assume the worst. Fear often arises from a lack of knowledge. The best way to dissolve that fear is with information. The internet can provide a plethora of information about commercial and industrial real estate investment and an endless array of articles where you can research and educate yourself on the industry. Fill in the gaps where you don’t understand and then organize all the information you have. If you familiarize yourself with the facts, you can make informed decisions rooted in fact, not fear.
Fear of Being a Landlord
When people think of owning commercial and industrial real estate, they must also think of the baggage that comes with it. Whether you’re an owner of a rental house or an office building, being a landlord is not easy. Once you own commercial and industrial real estate, it requires attention to detail, being able to adapt to the market, and the availability to meet the needs of your tenants. However, owning commercial and industrial real estate offers you the opportunity to learn necessary property management skills you can carry over to all your commercial and industrial real estate investment property. If the property can justify the cost of professional management, seek out this help so you can stay focused on finding other properties to buy.
Be Open to Help From Others
Many fears can hinder someone from investing in commercial and industrial real estate. We all deal with fear at different levels. However, you cannot allow fear to limit your ability to pursue the financial freedom and flexibility that comes with investing in commercial and industrial real estate.
One of the best ways to contend with fear is to find a network of support. Whether it’s friends, family, or other real estate professionals, help will give you space to negate your fears, receive the right advice, and find the emotional support you need to move forward. Finding a real estate professional, enlisting a mentor, or partnering up with someone who can help you ensures you have the right support behind you to be successful.