The benefits of a successful real estate investment are many and varied. However, when you venture into property management with a commercial real estate loan, you are invariably taking on a great deal of risk as well. Managing the risks involved, especially in volatile markets like Texas, can greatly enhance your chances for success.

Commercial real estate and the investment in a commercial real estate loan can be very lucrative and rewarding experiences. However, there is a certain level of risk that an investor While commercial property investing can be risky in ways that are unforeseen to the first-time investor, there are ways to minimize the risk. But be warned. There is ALWAYS risk and you should be very wary of anyone who tries to tell you otherwise.

One of the biggest risks to commercial real estate loans and commercial property is the market as a whole. There are so many factors that play in to the success of a real estate market that it is virtually impossible to predict them all, however, a smart investor is going to stay up to speed on a variety of things that will indicate local economic strength. The strength of local businesses and multi-family housing units are a very good indicator of local economic strength and can give excellent insight into the demographic movements of specific areas. This is especially true when it comes to professionals in the leading industries of the region. In Texas specifically, the market can easily be judged based on the movement of professionals hired to work in the energy sector. As that industry goes, so does the majority of the market.

Another massive risk of a commercial property are structural improvements and construction. This might not seem like a risk at first, as many properties require improvements and renovations before they are able to be viable income generating properties, as well as ongoing improvements. Where this becomes a risk, however, is when costs and time are underestimated. This is a very common occurrence and is not something that many investors are equipped to deal with, especially when involving a commercial real estate loan that requires payment. It is safe to assume, with commercial construction, that very little will go according to the proposed timeline and you will have to adjust both your end date and your expectations.

Knowing these risks to my commercial property and commercial real estate loan, what is the best way to prepare myself?

Many of the risks of commercial investments can only be minimized by being properly prepared and well educated about the flows of the market. Those risks that are the largest are completely outside of the control of the investor. While this might be daunting and stressful, it is also incredibly rewarding, as such risks have a tendency to turn away those who are faint of heart. This leaves plenty of opportunities for those who are willing to take on some risk (calculated risk) for plenty of reward. When it comes to commercial real estate loans, nothing is a sure thing, but by educating yourself and protecting your property, you can minimize the lasting impact of an economic downturn.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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