A Major Misconception that Many New Commercial Investors Have About Commercial Properties

These days, it seems like every single day brings a new story about how tough the lending environment is. Banks are shutting down left and right thanks to poorly-advised commercial loans, and everyone is groaning about how there is no credit to be had anywhere, even for the best deals in decades. This mindset, accurate or not, has had a major influence on the way that commercial real estate investors look at funding, and the results are not always positive. In fact, this notion that there is “no money” out there for deals can lead to a serious oversight that could stick you with a property that is full of potential problems.

As a result of the “credit crunch” and the “lending shortage,” many commercial investors are inclined to believe that if they can actually get a loan for a commercial property through a conventional lender, then they must be looking at a good deal. However, this is not always so. Lenders are not responsible for your due diligence, and they may either miss something important or not consider something a risk to their money that could be a huge risk to yours. Make sure when you are taking out a loan that you carefully review every word of the environmental inspection, the building code violations inspection, zoning codes, insurance, certificates and licenses and service and vendor contracts – even if the lender has already committed the money. A careful review of police reports is not a bad idea either. And if any of this does not make sense to you, hire a professional to go over it with you. These reports will hold the key to determining if a property is a good risk for you, regardless of how the lender is looking at it. Do not let your excitement over funding lead you down a bad commercial purchasing path.

What do you look for in your due diligence that lets you know a deal will work for you?

Thank you for reading! Your comments and questions are welcomed below.