Top 5 mistakes of new commercial investors
The popularity of commercial property once outweighed that of residential. In Naples, space for lease used to be at a premium, that allowed landlords to pretty much charge what they liked. There was still money to be made here, and also plenty of mistakes.

Here are the top 5 mistakes that new commercial property investors made over the past couple of years.

Firstly they ignored local market conditions. While Naples has a unique selling point to residential property investors, the same cannot be said for commercial. That strong residential pull supported most of the industrial and commercial properties in the area. The residents have to have somewhere to work after all. But, commercial rents began creeping higher and higher, making running a business here quite and expensive undertaking. To make a good investment, a lot of work has to be undertaken first. Local trends have to be understood, demographics, income, employment and crime. All factors that influence the viability of any property investment. A failure to understand local conditions can lead to failure. If you don’t know about property, you aren’t going to be able to do due diligence on it. Incorrectly assessing the condition of the building and its services might cost you a lot of money. Not understanding the local zoning or land use regulations could end is a significant loss.

Getting the math wrong is number three of our five. It stands to reason that any investor is in this for the money. Not getting the math right in the beginning is a great way to make a loss in any economy. Value is dependent on operating income less operating expenses. Getting those number wrong could mean the difference between a business’s survival or failure.

Getting the leverage wrong is next. Getting the LTV or Load to Value numbers wrong can leave you exposed if the market falls. Borrowing anything like 100% is no longer possible, thankfully, but even at lower LTV at say 80% a delicate balance has to be struck. Borrow too much and servicing the debt is going to eat all your profit or worse, cause you to make a loss.

Finally the last error a new commercial property investor can make is not to have a Plan B. A Plan B is an exit strategy, or a plan of what to do if things go wrong. Any investor needs at least a couple of exit strategies in case things don’t go the way you thought. You need to be able to get your money out, or you will run out of money. The glut of commercial space for lease in Naples may tempt you to invest. Do so by all means, just do it carefully, and with a long term view.