Three Commercial Property Investment Habits To Avoid

The last few years have been a fascinating time to be a property investment company, navigating a market for which the term ‘fast-moving’ is perhaps an understatement.

With house price indexes recording record increases, a mix of high demand and relatively short supply keeping the market moving quickly and several moves in the mortgage and investment loan market, property investment in 2022 can be potentially riskier than in other years.

As a result, successful property investment is a marathon rather than a sprint to investigate potential properties, buy them at the right price, sort out appropriate finance for them, manage or ensure they are managed to keep them valuable, lease them out and finally sell them for a profit.

However, for people looking to invest in this fast-moving market, there are several common habits that in 2022 especially should be avoided if possible.

 

Buying Low Cap Rate Properties

In general, property investment is about buying assets below their market value, and it can sometimes be better to make a good investment at a fantastic price than to invest in a fantastic property that is closer to its actual value.

A simple number that can help here is the capitalisation rate or cap rate, which is the percentage of the current market value the net operating income provides.

If you pay over the odds for a property that will not generate enough of a return, you may be stuck with a property that is hard to sell for a profit, even if you may think that this property or this acquisition is different, this time.

 

Not Enough Due Diligence

There are a lot of factors to examine, from the current state of the market, the condition of the property itself, its financial performance and more besides.

Because of how fast-paced the market has been, some people who have not worked with property investment experts have rushed into sales without performing the due diligence they need to make an informed choice.

This leads to lower returns, reduced cash flow and a property that can be difficult to sell on later.

 

Funding For The Sake Of It

In many cases, the best deal on a property is the one you walk away from, and whilst investment capital that is sitting idle may feel like a waste, a bad investment is far worse than no investment at all.