Seven Reasons Why 9 Out Of 10 Commercial Property Investors Fail

Nov 9, 2017

1. They Don’t Have A Plan

A commercial real estate is a business, pure and simple. If you want to succeed in it, you need to have a specific plan with steps laid out on what you will do in order to succeed.

That also means setting aside money for advertising, putting a lead generating process in place and a follow-up process, hiring a mentor, and being willing to put in the hours to make it all come together.

2. They Don’t Have A Strong Enough “Why”

Saying you want to earn a certain amount of money per month isn’t enough; you could choose any number of ways if that was your only reason for choosing commercial real estate.

You need to dig deep down and ask yourself why you’ve chosen commercial real estate in particular. What is it about you that pulls you into it? Where do you see yourself in five years from now?

Your why is more than a sentence on a paper. It is a living, breathing thing that will give you the strength to continue when the loan falls through on a property, or when a buyer backs out. It is what gives you strength to persist despite the challenges.

3. They Quit Too Soon

commercial real estate investors quit too soon

Investing in a commercial real estate is a numbers game. The more properties you see, the more likely you are to find a great deal. The experienced investor knows that they will have to sift through as many as a hundred properties in order to find one fantastic deal.

Some newbies get discouraged when they can’t seem to find a good deal, and simply give up. They assume they’re not cut out for real estate, or that you need to be “lucky” in order to succeed.

The truth is while luck is nice to have, it’s not luck making the successful deal – it’s the investor whose either amassed the experience he needs to thoroughly understand the market. Or its the mentor who the newbie hired in order to get a second opinion.

4. Failing To Do Due Diligence

Thorough due diligence is an essential part of a commercial real estate, but for some reason, newer investors can’t seem to wait to skip over it.

Perhaps they are merely too excited at the thought of finally owning a commercial property. Maybe they lack the experience to really know what things to watch out for.

Regardless of the reason, failure to do due diligence properly, especially with a commercial real estate, can have catastrophic consequences.

5. They Try To Do Everything Alone

There is a saying that behind every successful leader, there is a team of people making sure he stays that way.

commercial real estate investors need a dedicated team

Although it’s often said as a joke, the truth is that if you want to succeed, you need to enlist a team of people willing to bounce ideas off of, give suggestions, and take part of the work off of your shoulders.

The team doesn’t need to meet every time something comes up; you can also contact each professional when the need arises.

6. They Make Decisions Based On How They Feel

There is a romantic notion many of us about how we knew something was right because we had a “gut feeling” about it. But the facts show that very often our gut feelings are completely wrong, and in fact, are often completely wrong.

That’s why you should run the numbers not just once, but several times. Experiment with moving around some of the variables in order to see what your highest and lowest profit potentials are.

7. They Get Stuck In Analysis-Paralysis

Fear of failure means many inexperienced investors spend so much time crunching the numbers, that they don’t have time to actually invest in area property.

Sometimes no matter how you massage the numbers, a property won’t be profitable. Or maybe it will, but not in the timeline you expected. As a result of the investor panics, and rather than asking for help from a professional, they spend the next few weeks and months “deciding” on the deal until it’s finally too late.

Fortunately, all of these mistakes can be remedied by either finding a mentor, consulting with an experienced commercial real estate broker, or joining a community of like-minded investors who will hold you accountable for what you do (or don’t do).

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