When you venture into commercial real estate investment, understanding the due diligence process is an important place to start. Commercial real estate due diligence helps to ensure that you get a fair and reasonable deal on any property investment you make.
Here are some key elements to consider as part of your due diligence.
Before you make an offer
Commercial real estate due diligence starts before you make any offer. Assess the traffic in any particular area, including foot traffic and roadway volume. Research the vacancy rates and projected population growth of the area as well to help you assess the stability of the area. You also need to check the zoning laws to ensure adequate zoning for your plans.
After you make an offer
Once you make an offer on a commercial property, due diligence continues. Research any legal entanglements with previous ownership as well as any outstanding liens on the property. In addition, property inspection results apply as well. Every commercial real estate offer should include a contingency for property inspections. The inspection assesses structural integrity, plumbing, electrical and infrastructure. Consider any necessary repairs or concerns and adjust your offer accordingly.
As you approach the closing for your commercial property, the remaining due diligence should focus on your potential uses for the property, especially if you plan to lease it out.
Commercial real estate transactions are most successful when buyers complete their due diligence before closing on the property. The more details you address in advance, the easier it is to spot any potential issues before you close.