Commercial real estate investment is lucrative and one of the most popular methods for earning income. It is always in demand, and you need a reliable broker to keep up with the trends and make the right investments. However, this industry also requires precaution, so be alert when you encounter commercial real estate investment red flags.

Some of the red flags are obvious, so you’ll notice them right away, but others need more careful consideration to spot. Ignoring these red flags can be dangerous, so stay on the lookout.

Top Commercial Real Estate Investment Red Flags

Following is a list of common issues that you need to be wary of when shopping for commercial real estate.

1. The Seller Doesn’t Let You See the Entire Property

You must never buy a property you haven’t seen, especially if the seller makes it a point to prevent you from getting access. It is rare for sellers to bar potential buyers from visiting entirely, but they have found ways around the problem.

It is a red flag if the seller or their listing agent prevents you from seeing any part of the property, no matter what excuses they make. They are likely trying to hide something, and it isn’t wise to invest and find out.

2. Properties with Visible Repair Problems

Decline any property with significant maintenance issues. Sellers try to put their best efforts into making the property look sales-worthy. Therefore, if you spot visible maintenance problems, there might be bigger problems waiting for the buyer to discover.  Be sure to have the property inspected by an independent inspector prior.

3. Mold Growth or Other Water Damage

Mold growth is an indicator of water damage and is a health hazard. However, that’s not the only reason mold is bad news. Mold eats away at the construction material, so leaving it untreated can lead to serious structural damage.

Additionally, the presence of mold also shows that the property owner failed to get water damage repaired. This behavior is one of the most common commercial real estate investment red flags, so be careful when you encounter it.

4. Property is Heavily Discounted

Have you recently seen a great property at an unbelievable bargain price? Please don’t fall for it. No one is charitable enough to sell a valuable property for much less than they can get for it. Therefore, the bargain price means there is something wrong, even if it isn’t apparent.

You’ll need to get the property and seller thoroughly investigated if you like the property. It will provide clarity, and you’ll make a more informed decision.

5. Neighborhood with Slow Commercial Growth

We recommend against buying a property in a slow-growing neighborhood because it won’t improve your portfolio. Even if the property is structurally well-maintained, the slow commercial growth will keep its value from growing.

 

Wrapping Up

To conclude, being wary of commercial real estate investment red flags can protect you from predatory deals that will create unnecessary costs for you. Don’t hesitate to contact the CHRE team to explore commercial real estate investment in Rio Grande Valley.

We have been working in the industry for several years and find the best deals for your portfolio.