Real Estate Investor Magazine South Africa June 2016 | Page 40

GETTING STARTED

Top 5 Mistakes

First-Time Commercial Real Estate Investors Make

BY DREW HOOK

The popularity of commercial real estate has exploded in the last few years , and the media is full of war stories from new investors who find themselves in deals with problems . In almost every case the cause is traceable to a lack of knowledge about a few simple precepts that form the ground rules of successful commercial investments . These are the basic practices that when used correctly will eliminate the most common causes of a bad deal .

1 Ignoring local market conditions

There are two levels of due diligence required to evaluate a real estate investment--the market and the property . And of the two , local market conditions trump everything else .
Every market is different , and a deal technique or property type that is profitable in one market it does not mean the same holds true anywhere else .
Analyzing the demographic trends of population growth , income , and employment in the local market will tell you where opportunity lies , or not . It will also show which property types are in demand , or oversupply . Those conditions will make or break your investment .

2 Inadequate property due diligence

The second level of due diligence is the property condition , including physical items such as building systems , environmental matters and structural components . Just as important are the
38 JUNE 2016 SA Real Estate Investor www . reimag . co . za