Top 5 Mistakes New Commercial Real Estate Investors Make
- Nate Jones, CPCU, ARM, CLCS, AU
- Oct 17
- 2 min read
Commercial real estate (CRE) offers tremendous potential for long-term wealth, but it’s not without its challenges—especially for first-time investors. Avoiding common mistakes early on can save you time, money, and stress.
Mistakes to Look Out For
1. Skipping Due Diligence
One of the most frequent and costly mistakes is rushing into a deal without thorough due diligence. Investors often overlook zoning restrictions, lease terms, environmental risks, and deferred maintenance. These oversights can lead to unexpected expenses and legal issues. Always conduct a full inspection, review financials, and consult professionals before closing.
2. Overleveraging Without a Backup Plan
Financing is a powerful tool, but relying too heavily on debt can backfire. New investors often assume ideal conditions—steady rent, low interest rates, and full occupancy. If any of these change, cash flow can suffer. Use conservative loan-to-value ratios, stress-test your financial models, and maintain a reserve fund for emergencies.
3. Focusing Only on Cap Rate
While cap rate is a useful metric, it doesn’t tell the whole story. High cap rates can be misleading if the property is in a declining market or has weak tenants. Look beyond the numbers—evaluate location, tenant quality, lease terms, and long-term growth potential to make informed decisions.
4. Underestimating Operating Costs
New investors often miscalculate the true cost of ownership. Property taxes, insurance, repairs, utilities, and management fees can quickly add up. Create a detailed budget that includes all expenses and set aside funds for unexpected costs. This ensures your investment remains profitable even during downturns.
5. Managing Without a Team
Commercial real estate is complex and requires expertise in leasing, legal compliance, property management, and finance. Trying to handle everything alone can lead to burnout and costly errors. Build a team of trusted professionals—brokers, attorneys, inspectors, and insurance advisors—to support your investment journey.
Insurance Considerations for New Investors
Every commercial property carries risk—from tenant liability to structural damage and business interruption. Wexford Insurance offers customized commercial property insurance for all asset types, including apartments, office buildings, retail spaces, warehouses, and more.
Our coverage includes:
Loss of rental income
Specialized coverage for mixed-use and multifamily properties
With Wexford Insurance, you get peace of mind and expert support tailored to your investment strategy.
Final Thoughts
Avoiding these five common mistakes can set you up for long-term success in commercial real estate. With the right strategy, team, and insurance coverage, your investment can thrive in any market.
Contact Wexford Insurance today - your trusted partner for commercial property insurance.
FAQs
Q1: What’s the most important step before buying a commercial property?
Thorough due diligence—review leases, inspect the building, and analyze market conditions.
Q2: How much should I budget for unexpected costs?
Experts recommend setting aside 10–15% of your total investment for unforeseen expenses.
Q3: Do I need insurance before closing on a property?
Yes. Insurance should be in place before closing to protect against immediate risks.
