If you look at the portfolios of most of today’s wealthiest individuals, you will find commercial real estate. These investments largely increase in value over time and tend to be more stable than the stock market. However, these properties also have risks. Therefore, these are a few common mistakes commercial property investors make and how to avoid them.

Not Doing Your Due Diligence

Every investment, especially those in real estate, requires a certain amount of due diligence. Therefore, you need to have your prospective properties fully inspected. Ensure that the building meets any federal, state, and local standards for occupancy. Also, learn about any necessary renovations.

You need to understand all the numbers, from the sales figures to your prospective rental income and asset valuation. Review any current and past lease agreements the current owner has. You should also check the property tax status to ensure that these taxes are up to date.

Not Sticking to Your Budget

Before you begin your investment journey, you should set a budget. You should know how much you can comfortably spend.

You may find that your properties increase in value faster than you expect or that your rental income is higher than you calculated. These investments can be lucrative. However, you shouldn’t expand your budget based on short-term gains.

You also shouldn’t expand your budget because you think that specific property will give you a greater return. These budget expansions can cause you to overextend yourself. This increases your debt and risk and can cause financial disaster.

Not Building a Team

Like most major tasks, you shouldn’t begin your real estate investment journey by yourself. Your first task should be finding a mentor with extensive experience. Your mentor should let you shadow a few transactions and guide you through a few of your own.

You will also need a real estate attorney, accountant, realtor, and mortgage broker. You should develop good relationships with building inspectors as well. You may even get friendly with tax assessors and a local title company. You will also need access to at least one reputable contractor, even if you don’t plan to do any renovations.

Choosing the Wrong Property

Commercial real estate includes multifamily residences; office, retail, mixed-use and industrial spaces; and vacant or raw land. However, the returns, income potential, and required oversight of each type of property vary significantly.

Although no investment is technically wrong in general, some may not fit your needs, making them wrong for you. Learn about each property type and choose those that best fit your expectations.

By learning about the common mistakes commercial real estate investors make, you can better protect yourself and your financial future.