What you wish somebody would have told you before jumping into the investment property world.
While we don’t like to be negative when it comes to the exciting opportunities that surround commercial property investments, it pays to know the mistakes that people have learned from in the past. Many times, the dollar signs flash and decisions are made quickly without the research or experience to back them up. Investors will often assume they know best and are surprised when their wallets aren’t as fat as their projected ledgers. We’re here to help you avoid common assumptions that plague novice investors and offer some proven alternatives along the way.
Property taxes are higher (than you assumed)
All the due diligence and research aside, you may still be surprised when you open your first property tax bill. Local governments around the country will request commercial property owners to fill out and return an income and expense form each year. This form is used to determine the value of the property in question—but nothing on the form explains to you, the owner, how the assessors will use the information you provide to calculate your future property tax. While you can prepare yourself by knowing how the local governments determine commercial property value, it pays to contact your tax professional early in the process to mentally and financially prepare yourself.
Renters do more damage (than you assumed)
While residential properties are more notorious for shabby renters trashing things before moving out, it happens on the commercial side, too. Similar to how good tenants are invaluable for property owners and managers, poor tenants can cost you not only money in repairs, but also money in lost rent while repairs are taking place. While commercial renter’s insurance includes liability coverage in case your building is inadvertently damaged, it mainly covers large, catastrophic expenses, leaving the routine maintenance costs coming out or your, or hopefully your renter’s, pocket.