There has been considerable talk in the media lately about the potential of a recession in the near future. Even speculation about a recession can affect many investors' decisions about whether to put money into any commercial property.
Fears over the current trade wars, the looming federal debt, the Federal Reserve's recent decision to cut interest rates all have investors a little nervous. However, there are still some good opportunities for smart investors looking at commercial property.
Just avoid making these kinds of mistakes:
Forgetting about taxes
Commercial property owners have to pay property taxes and income taxes on the money they make from those properties. Remember to price your rent accordingly to stay out of the red. Also, keep an eye on what's happening in your local market. Local taxes on commercial properties can rise suddenly due to economic conditions unique to the local area.
Underestimating maintenance costs
There's no such thing as "hassle-free" rental property. You have to have money set aside for unexpected repair bills and regular maintenance issues. Don't forget that tenants -- particularly residential ones -- can also be rough on property. You may frequently have to put money into clean-ups and fixes in between tenants, depending on your turnover rate.
Investing without a corporate shield
One of the worst mistakes investors can make is to directly invest their money without forming some type of corporate entity first. Smart investors often have several different corporate entities to hold different properties -- which is a way of insulating against liability claims. Without the proper corporate framework to hold the property, commercial investors can be personally exposed in a lawsuit.
If you're thinking about investing in commercial property, talk to an experienced attorney. They can provide valuable guidance.