Here is part 2 of our Commercial Real Estate Mistakes to Avoid. If you missed the first one, Commercial Real Estate Mistakes to Avoid Pt. 1
Negotiating on Your Own Behalf
“A doctor that treats himself has a fool for a patient.” Even expert negotiators need to use a third party to handle a negotiation of importance. The desire for a particular property can cloud the clear mind required for effective commercial real estate negotiations.
Just as important as failing to negotiate on your behalf is a conflict of interest. You want to be sure that your negotiator has absolutely no conflict of interest. If your adviser represents landlords in the target market, that would be a clear conflict of interest in your negotiations.
Failing to Evaluate a Purchase Scenario
Under the right circumstances, corporate real estate ownership has the strong advantages of tax sheltering, equity, cash flow and potential appreciation. However, the decision to own versus rent is complex and one should seek expert advice.
Some factors beyond acquisition cost include:
- Tax Ramifications of Ownership – unique to each investor’s in- come and tax situation
- Opportunity Costs – for example, a business may be growing so fast that they actually get a higher return by reinvesting money in operations rather than investing in more space
- Estimated holding period of investment
- Market dynamics
- Plans for growth
- Need for liquidity
You wouldn’t go into court without having the best attorney at your side, nor would you go to the IRS without your accountant. Therefore, you should use the best real estate expert you can find for all your real estate transactions.
Other great Corporate Real Estate articles:
