Common Mistakes Real Estate Investors Make

Right now the real estate market is extremely active, which means that bidding is becoming more and more competitive. This is stressful time for investors, so it’s vital that they steer clear from making real estate mistakes, which could lead to overpaying for a piece of property or buying up assets indiscriminately. Those who are new to commercial real estate or veteran agents who are trying out a new investment strategy should especially pay critical attention to their actions.

In a recent interview conducted by National Real Estate Investor with Robert J.M. Occhiogrossi, the managing director of IVI Assessment Services, Christopher Macke of American Realty Advisors, and Nicholas Coo, managing director of Faris Lee Investments, brokers were asked about the most common mistakes in real estate at pivotal market points.

Here are a few common mistakes that are generally made at this time of year that investors should make sure to take note of:

Incomplete Diligence

The first mistake is performing incomplete diligence, which means that buyers will cut their process short for various constraints like time. When investment processes are cut short, important information can be missed and an investor will be unpleasantly surprised in time. Remember, making a commercial real estate investment is a long process and no amount of details should be missed. According to Occhiogrossi, other mistakes involving this process include performing “‘inadequate level of due diligence to evaluate existing collateral and waiving rights to perform due diligence of vertical components, particularly in portfolio situations,’” (Misonzhnik, 8 Most Common Mistakes Real Estate Investors Make).

Assuming Newly Constructed Buildings have Zero Problems

Another mistake often made by investors when the market is really active is that they assume newly constructed buildings have zero problems. Just because a building is new, does not mean that it does not have any problems. In fact, newer building sometimes have more problems than ones that have been around for years. This is because builders generally rush to complete developments when the market is booming, which leads to defects in construction plans from hiring less qualified workers.

Focusing on Short-term Noise

Lastly, investors will often focus on short-term noise instead of long-term signals, particularly when they are looking to profit from the real estate investment right away. According to Chris Mack, “Focusing on short-term ‘noise,’ whether it be the daily speculations surrounding Fed policies or daily gyration in the stock market, as opposed to the underlying factors that actually drive commercial real estate returns such as employment growth, capital flows into commercial real estate and property fundamentals is another common mistake,” (Misonzhnik,8 Most Common Mistakes Real Estate Investors Make).

For more information about the mistakes commercial real estate investors make, read
National Real Estate Investor’s article here.

Frank Jermusek

Frank Jermusek, J.D.

President / Managing Director

Frank Jermusek is a Principal at SVN | Northco headquartered in Minneapolis, Minnesota. SVN has become one of the most recognized commercial real estate brands in the world with over 200 offices globally.