5 Things I Wish I Knew Before Buying Commercial Real Estate
Are you thinking about making the jump from residential real estate to commercial real estate?
Before you sign that deal, there are some crucial things you must know. Buying your first commercial property can be an exciting yet overwhelming experience.
There are hidden pitfalls, costly mistakes, and valuable lessons that many investors learn the hard way. But not you—because in this blog, we’re going to break down everything you need to know before you invest in your first commercial property.
1. Inspections Don’t Catch Everything – Always Budget for the Unknown
When you buy a commercial property, you’ll likely have an inspection done. But here’s the catch—inspections don’t catch everything. There will be deferred maintenance issues that only appear once tenants are in the building. Slow leaks, intermittent HVAC problems, unexpected structural repairs—these things happen after you take ownership.
I learned this lesson the hard way. One of my first commercial properties—a 6,000-square-foot building in a Nashville suburb—passed inspection with flying colors. Two months after closing, the HVAC completely failed, and replacing it cost me $20,000. The worst part? The unit was buried in the basement, and nobody had any idea how it got there in the first place. That meant even more time and money spent just figuring out the logistics of getting a new system installed.
This kind of surprise can be devastating, especially if you don’t have a proper capital expenditure (CapEx) budget. Many first-time investors assume that inspections will catch everything or that the seller will disclose any major issues. They won’t. Sellers aren’t always upfront about problems, and some issues don’t reveal themselves until tenants start using the space full-time.
If you’re syndicating a deal with investors, this is even more critical. The last thing you want to do is go back to your investors asking for more money because you underestimated repair costs. It damages your credibility and hurts their returns.
Pro Tip:
Always have a CapEx and contingency budget in place before closing.
If an inspection comes back "perfect," assume it's not—there's always something lurking.
If the property is older, expect higher maintenance costs and build that into your underwriting.
Consider getting a Property Condition Assessment (PCA) from a specialized firm—they often catch more than a general inspector.
Plan for a higher-than-normal maintenance budget in the first few months—it’s rare that nothing goes wrong once you take over.
Surprises in commercial real estate are inevitable. But the investors who budget for the unknown are the ones who sleep better at night—and profit in the long run.
2. Smaller Deals Aren’t Always Easier or Cheaper
It might seem logical to start small—after all, a lower purchase price feels like a safer way to dip your toes into commercial real estate. But here’s the reality: smaller properties come with their own set of risks, and they aren’t always cheaper in the long run.
Let’s break it down.
The Hidden Costs of Small Deals
A $120,000 commercial property might sound like a great entry point, but consider this—major expenses like roof repairs, HVAC replacements, and plumbing issues cost just as much for a small property as they do for a larger one.
For example, when I bought my first commercial property, I had to replace the HVAC system just two months after closing. $20,000 gone—just like that. Now, if that had been a 30,000-square-foot office building instead of a small 6,000-square-foot space, my cost per square foot for the HVAC replacement would have been significantly lower.
The same applies to roofs, parking lot resurfacing, and interior renovations. Whether your property is 2,000 square feet or 20,000 square feet, the cost of replacing a roof or an HVAC system isn’t that different. That means smaller buildings can eat into your profits faster if something goes wrong.
Bigger Deals Mean More Stability
Another downside to smaller deals is that a single vacancy can wreck your cash flow. If you own a small retail building with only two tenants, and one moves out, you just lost 50% of your income overnight.
On the other hand, if you own a multi-tenant strip center or a larger office building, losing one tenant might only drop your income by 10% or 20%, making it much easier to absorb the hit. That’s why larger properties tend to be more stable investments over time.
Why Many Successful Investors Go Bigger, Sooner
Many commercial investors skip the small stuff and go straight for larger properties with multiple tenants—even on their first deal. But how?
They partner with experienced investors or raise capital from outside investors to go after bigger deals that make more financial sense.
Think about it this way—if you can buy a $3 million commercial building using investor capital, why spend your own savings on a $300,000 deal that comes with all the same headaches but lower returns?
Pro Tip:
Bigger isn’t always riskier—it can actually be safer when you have multiple tenants covering your mortgage.
Partner up. If you don’t have the capital for a bigger deal, find an experienced investor who does. Bring them a great deal, and they’ll likely let you in on the investment.
Factor in major repair costs upfront. Just because a building is small doesn’t mean maintenance will be cheap. Always budget for things like HVAC, roofing, and plumbing.
Look at the long-term scalability. Are you buying a deal that will help you grow, or will it limit your ability to move up in the commercial real estate world?
Small deals aren’t always safer or easier—they just come with different challenges. If you want to build serious wealth in commercial real estate, think bigger, sooner.
3. Your Tenants Will Make or Break Your Investment
One of the biggest mistakes new commercial investors make is underestimating the importance of their tenants. When you buy commercial real estate, you’re not just buying a building—you’re buying the income stream that comes with it. And that income is 100% dependent on your tenants.
A bad tenant can turn your dream investment into a nightmare, while a strong, reliable tenant can make your investment almost effortless.
Not All Tenants Are Created Equal
You might think that leasing to any tenant is a win, but that’s far from the truth. There’s a huge difference between leasing your space to a well-established corporate-backed tenant like Starbucks versus leasing to a brand-new, unproven local business.
Example: Corporate vs. Local Business
Let’s say you own a retail strip center. You have two leasing options:
Option A: A national coffee chain that signs a 10-year lease with built-in rent increases.
Option B: A new startup café with no proven track record, asking for flexible lease terms.
The difference? Banks, appraisers, and investors love corporate-backed tenants because they provide stability, predictable income, and reduced risk. Small businesses, while great for communities, carry a higher chance of defaulting on rent, leading to vacancies, legal disputes, and costly turnover.
That doesn’t mean you should never lease to local businesses—it just means you need to carefully vet their financials and business model.
A Vacancy Can Crush Your Investment
When you own a commercial building, a single vacant space can drastically cut your income—sometimes wiping out your profits altogether.
For example, imagine you own a 10,000-square-foot office building with a single tenant paying $10,000/month. If they suddenly move out, you go from $10,000 in rental income to $0 overnight.
Compare that to a multi-tenant property where five businesses each rent 2,000 square feet. If one moves out, you’re still collecting rent from four others, making it easier to absorb the hit.
Diversify your tenant base whenever possible. Multi-tenant properties reduce risk because your income doesn’t rely on just one business.
Tenant Relationships Matter More Than You Think
Many investors treat tenants like an afterthought, but maintaining strong relationships with your tenants can save you thousands of dollars in the long run.
If your tenant is struggling, wouldn’t you rather have them call you first before they just stop paying rent? A simple conversation can mean the difference between a temporary cash-flow issue and a costly eviction.
Pro Tip:
Vet every tenant carefully. Look at their financials, business history, and track record before signing a lease.
Prioritize creditworthy tenants. A corporate-backed lease is far more valuable than a high-risk local tenant.
Build relationships. If tenants trust you, they’ll communicate problems early, giving you time to find solutions.
Plan for vacancies. Even great tenants leave. Always budget for downtime and leasing commissions.
Your commercial property is only as strong as your tenants. Choose them wisely, take care of them, and they’ll take care of your investment in return.
4. Self-Managing Can Cost You More Than It Saves
When you’re just starting out in commercial real estate, it’s tempting to self-manage your property to “save money.” After all, why pay a property management company 5-10% of your rental income when you can just handle things yourself?
But here’s the reality: self-managing can end up costing you way more in the long run.
Why Self-Managing Is a Hidden Trap
Sure, self-managing seems like a great way to pocket a little extra cash. But what most first-time investors don’t realize is just how much time and effort it actually takes.
Example: The "Extra $2,000 Per Month" Trap
Let’s say your property generates $20,000/month in rental income, and you’re thinking about saving 10% ($2,000) by managing it yourself. Sounds great, right?
Now consider this:
You’re the one getting maintenance calls at 9 PM about a broken HVAC system.
You have to chase down late rent payments and deal with tenants who try to negotiate their way out of leases.
You’re responsible for handling repairs, lease renewals, and property marketing when a tenant moves out.
If self-managing eats up 20+ hours a month of your time, that means you’re basically working for $100/hour just to save that $2,000. But what if you could spend those same hours finding your next deal, raising capital, or scaling your portfolio?
The Bigger Your Portfolio, The Less Self-Managing Makes Sense
When you own just one or two properties, it might feel manageable to do everything yourself. But as you grow your portfolio, the responsibilities pile up quickly:
Managing multiple tenants across different properties
Dealing with unexpected repairs (because something always breaks)
Handling property taxes, insurance, and accounting
Ensuring lease agreements are structured properly to maximize cash flow
The best investors scale fast because they delegate and focus on what truly grows their business. Of course, this is excluding those that decide to build a true property management company to run their day to day (still not self-managing!).
The Role of Property Managers: What They Actually Do
A good property management company isn’t just an expense—it’s an investment in your sanity and profitability. Here’s what a solid property manager handles for you:
Tenant Screening: Vetting tenants to avoid late payments and high turnover
Rent Collection: No more chasing down tenants for checks
Maintenance Coordination: They handle repairs, so you don’t have to
Lease Renewals & Marketing: Keeping your property occupied with quality tenants
Accounting & Reporting: Ensuring your books are clean and tax-ready
By outsourcing these tasks, you free up time to focus on finding more deals—which is where the real money is made in commercial real estate.
Pro Tip:
Don’t just go with the cheapest option—you get what you pay for.
Look for property managers who specialize in your asset type (e.g., retail, office, industrial).
Set clear expectations and reporting structures upfront.
Even with a manager, stay involved—your property is still your investment.
Yes, you can self-manage—but should you? Absolutely not if you want to scale and build true financial freedom. The best investors focus on high-value activities like acquiring new properties, securing financing, and networking with other investors—not answering maintenance calls.
So before you convince yourself that saving a few thousand bucks is worth it, ask yourself: Are you trying to run a real estate investment business, or are you just creating another job for yourself?
5. You Learn the Most by Taking Action
One of the biggest mistakes aspiring commercial investors make is getting stuck in analysis paralysis—constantly reading, researching, and overanalyzing deals without ever pulling the trigger. But no book, podcast, or YouTube video will prepare you for commercial real estate like actually doing a deal.
I get it—buying your first commercial property is intimidating. There’s a lot of money on the line, and the fear of making a mistake can be paralyzing. I’ve been there. But the truth is, no amount of preparation will ever make you feel 100% ready. At some point, you just have to take the leap.
The Myth of "Just One More Book"
Before I bought my first property, I kept telling myself:
“I just need to read one more book, and then I’ll be ready.”
“If I take one more underwriting course, I’ll finally understand commercial real estate.”
“I should grab coffee with one more investor before making an offer.”
But here’s what I realized—no amount of theory can replace experience. I didn’t truly understand what it meant to own and operate commercial real estate until I was in the trenches dealing with real-world problems—unexpected repairs, lender negotiations, tenant relationships, and everything in between.
The Fastest Way to Learn? Partner with Experience
If you’re serious about getting into commercial real estate but don’t feel ready, find a partner who has already done it.
When I did my first development deal, I didn’t have all the answers—but I had a partner who did. I found the deal, managed the project, and learned hands-on from someone who had already succeeded in the industry. Without that partnership, my first deal would have taken years to get off the ground.
How can you bring value to an experienced investor?
Find off-market deals they wouldn’t have access to.
Offer to handle the underwriting and due diligence.
Assist with property management or leasing.
Help raise capital or contribute sweat equity.
Successful investors want to do more deals—and if you bring something to the table, they’ll be happy to show you the ropes.
Stop Waiting for the "Perfect" Deal
Many new investors wait too long because they think their first deal needs to be perfect. But the truth is, your first deal is about learning, not perfection.
Think of it like riding a bike. You can read all the books about cycling, but until you actually get on the bike and start pedaling, you won’t truly understand how to balance, steer, or pick up speed.
The same applies to commercial real estate. Your first deal doesn’t have to be a home run—it just has to get you in the game.
Pro Tip:
Set a deadline for when you’ll make your first offer—then stick to it.
Underwrite one deal per day to sharpen your skills.
Join a mastermind or mentorship program to stay accountable.
Partner with an experienced investor to learn by doing.
Remember: You don’t need all the answers—you just need the courage to start.
Success in commercial real estate isn’t about being the smartest person in the room. It’s about being the person who takes action.
So stop waiting for the “perfect moment” or the “perfect deal.” Take what you’ve learned, find an opportunity, and go for it. Because the best way to learn? Jump in and start doing.
There are hidden pitfalls, costly mistakes, and valuable lessons that many investors learn the hard way. But not you—because in this blog, we’re going to break down everything you need to know before you invest in your first commercial property.