Six tips for smart commercial investing

The best-looking property could actually represent the worst real estate investment you've ever made.

Remember that commercial real estate investing is all about the deal, the terms and the return on investment. Here are some tips for successful commercial real estate investing.

TIP #1: Be an investor and not merely of an accumulator of commercial properties.

The reason you make investments is to produce an income or a profit. So if you buy a property that produces little or no profit, you basically just acquired a property (instead of making an investment).

TIP #2: Understand that every commercial property has a lifetime.

One of the biggest mistakes you can make as an investor is to ignore the fact that over time, you will need to spend money on the upkeep of the building. The building may need a new roof or the electrical system may need to be updated.

Every building goes through these phases, some more so than others. Therefore, make sure you have a long-term plan to handle such repairs.

TIP #3: Focus on one commercial investment type at a time.

Especially when you're first starting out, you should focus on one type of investment: offices, shops, warehouses, or whatever.

Each deal needs and deserves your undivided attention. It's better to be master of one than average over many. And who wants average-performing properties anyway?

TIP #4: Get a mentor so you can learn from his or her mistakes.

Mentors can save you from making costly mistakes; identify when you've missed due diligence items; and connect you with resources that you otherwise wouldn't have immediate access to.

TIP #5: Determine whether you and your assets are adequately protected.

Unfortunately, lawsuits can occur, therefore, you need to do everything you can to protect yourself. So ask yourself the following questions:

How is your property protected?

What do you have at stake, if you lose a lawsuit?

Is your personal property (for example, your home) protected?

Are your other investments totally separate from each other so that one lawsuit doesn't affect the other investments?

Don't try to guess, when it comes to the answers to these questions. Talk to a lawyer to ensure that you're protected if you were ever to be sued.

BONUS TIP: In a partnership or syndicate, finance the deal using a non-recourse loan.

Non-recourse means that you aren't personally guaranteeing the loan. This gives you two distinct advantages: it allows you to be taken off the loan if the partnership goes sour. And, if the property were to fail, it won't be tied to you personally.