Real estate investing can be very exciting, but it does take some work to be successful. Here are five common mistakes that investors should try to avoid making when purchasing commercial and investment-purpose real estate:

1. Fail to account for all costs and expenditures. Many investors forget to include transaction costs (which can be as much as 10% of the property’s purchase price) and one-time expenditures, such as updating appliances or infrastructure. These costs can eat into your anticipated profit or cause you to run over your budget if they are not included in initial calculations of the project’s expenses.
2. Assume property values will go up. Savvy investors acknowledge that the real estate market is complex and that not all properties will increase in value all of the time. The key to making good investments is being willing to conduct research and due diligence to help you understand the trends of your local market. It can also be beneficial to seek advice from your hard money lender and others who have experience investing in your geographic area.
3. Buy property before developing a plan for it. Investment real estate purchases should never be made on a whim without a plan. You’re much more likely to get a good deal on a valuable asset if you research the property and figure out what you can do with it, rather than relying on a gut instinct that a property has potential. This is especially true if you are investing in a distressed property that needs rehab before it can produce income or be resold. Additionally, hard money and private lenders are unlikely to approve a loan against a property for which the borrower doesn’t have even the outlines of a business plan.
4. Invest without any help. If you try to wear too many hats, it’s doubtful that you’re giving your best to any one role. Commercial real estate investing requires myriad tasks and diverse skills (e.g., buying, rehabilitating, cleaning, advertising, managing, renting, and reselling). It’s important to recognize where your personal strengths lie and to recruit team members whose strengths complement yours. When investing in distressed properties, it’s good to have contractors and subcontractors that you can trust to help you renovate buildings on time and on budget. Another key partner for savvy investors is their hard money lender. Establishing a relationship with local private lenders increases your ability to get the funds you need when you need them.
5. Acquire properties without at least one exit strategy. The real estate market can be unpredictable, so it’s essential to figure out your exit strategies before you invest. It’s best to have multiple exit strategies in case your first strategy doesn’t pan out. What if you can’t find renters or tenants as quickly as you initially planned? What if you can’t resell the property as soon as you wanted to? Having multiple exit strategies will give you other options in such situations. It’s also important to keep the lines of communication with your lender open, especially when things aren’t going as planned. Your lender’s experience can work in your favor if you just let them know what’s going on.