Due diligence is a term often heard in the commercial real estate industry. Simply stated, buyers who do their due diligence have done the research to determine important information about any property they are considering.
If you are preparing to purchase your first piece of commercial real estate, this information will help you improve your due diligence process for a better purchasing and ownership experience.
Verify basic data
The first factual information a commercial real estate buyer will need is the basic data and records available for each property under consideration. This should include any public records and information, including:
- plats, deeds, and other documents available from the county recorder's office
- property tax information available from the collector's or assessor's office
- utility history from utility providers
- permits, building codes, and any existing safety code violations on record at the planning and zoning office
In addition, past listing and sale information may be available in local real estate records. Buyers will also want to carefully examine any available seller's disclosure documents and take steps to determine if there is any current or past litigation that might impact the value of the property or your usage of it.
Use qualified inspectors
Thorough professional inspections of the property, and each of its systems, is the best way to ensure that any property issues are known and can be considered as part of your decision process. In addition to evaluating the basic structure and systems, you may also need to do environmental studies, property condition assessments, and seek out specific information such as pedestrian or vehicular traffic studies.
Consider your goals
Your first commercial property purchase should closely align with the trajectory you envision for your real estate investment portfolio. To ensure that any property you are considering meets these criteria, take the time to review and update your business plan to see how it might fit in.
Some information to consider for this purpose includes:
- the property's current income stream
- type of leases currently used and vacancy rates
- any plans for the area that might positively or negatively affect the value, such as zoning changes
Taking the time to perform good due diligence on each property before purchasing can help new real estate investors learn more about their commercial real estate market and develop more confidence in their ability to be successful.
To learn about all aspects of purchasing commercial real estate, prospective buyers should seek out and partner with an experienced real estate professional who specializes in listing and selling commercial property.
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