Monday, March 4, 2024

Myths & Misconceptions: The Truth About 5 Common Real Estate Myths.

December 27, 2022 by  
Filed under Business, Money, Opinion, Weekly Columns

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( Investing in commercial property for sale can help you build wealth, expand your portfolio, or provide a central office for your business to grow. That being said, there are a lot of myths that keep people away from the profitable real estate market. Let’s take a look at five of the most common myths and expose the reality beneath. 

1. Real estate requires you to be rich

Although commercial real estate isn’t as cheap as buying a few stocks, it isn’t as expensive as most people assume. For example, you may need to be a multi-millionaire to invest in large warehouses, manufacturing buildings, and other industrial assets. However, you don’t need to be one to invest in small factories and company offices. 

Furthermore, bank loans and investment partnering can help if you need extra capital. To improve your likelihood of gaining their help, make sure you present the real estate project in a way that highlights your experience, skills, and ability to return a profit. 

commercial property

2. More expensive properties are better

Alongside the myth that you need to be wealthy to own real estate is the myth that the most expensive real estate is the best. If a property is so expensive that only a few people can afford it, then the price is unlikely to go up because there’s not a lot of competition. By contrast, if a property is affordable to a broad range of people, then the price is more likely to rise over time because there’s more competition. 

3. There’s too much risk

Any investment decision comes with risk – including the decision not to invest at all! Certain real estate properties do indeed come with high risk, but plenty of others are medium to low risk. Like any investment, it’s essential to define your risk tolerance so you can direct your search toward the properties that fit within it.

For commercial investments, risk involves the property itself as well as the conditions of the lease. Quality inspections reduce risk in the former, while careful review reduces risk in the latter. In general, lower risk means lower returns, so it’s crucial to balance your risk tolerance with a desirable return.

4. Maintenance is too time-consuming

If you’re just entering the commercial real estate market, you may assume it’s your job to take care of maintenance. Investors who are particularly handy may prefer to maintain the property, but it’s by no means required. Remember, your primary job as an investor is to find a great deal and negotiate the terms favorably. So if you’d rather not worry about every leaky pipe, then it’s best to outsource maintenance to a property manager and expert contractors. That way, you’ll be free to scout new investment opportunities. 

5. Only bad properties go on sale

There’s a common myth that only “bad” properties go up for sale – those that are either faulty or tangled up in fraud. However, that’s far from the whole truth. 

Investors sell properties for many reasons. Some need extra capital to invest in a larger property, others have to sell to pay off debts, and others have reached a point where an exit strategy makes sense. 

Of course, some faulty or fraudulent properties do still hit the market, so it’s essential to perform the same due diligence you would do with any other business decision or investment. Alongside that, contact professionals in the area who know the local market. 

Remember the truth behind the five myths above, and you’ll be on your way to better real estate decisions.

Staff Writer; Susan Jackson

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