Did you know…Conducting thorough due diligence before investing in commercial real estate can reduce risk

Did you know…Conducting thorough due diligence before deciding to invest in a commercial real estate property can reduce risk and help the investor avoid mistakes and evaluate their bottom line.

Generally, due diligence in commercial real estate refers to the research, investigation, and assessment stage that occurs before purchasing or investing in a commercial property. Due diligence helps the potential investor identify risks involved with the investment and allows the investor to make the most informed decision possible. The most common factors to consider in the process are the property’s physical condition, environmental risks, zoning laws, financials, tenant leases, and the seller’s background (Junaid, 2024).

There are many websites where investors can find due diligence checklists. The checklists all vary slightly, but, in general, a commercial real estate due diligence checklist may include:

General

• Physical inspections of the property
• Obtain site plan / survey
• Obtain property history of capital improvements
• Reiew environmental reports

Financial

• Obtain most recent property tax returns
• Review leases
• Review rent roll and tenant history
• Review utility bills and other property expenses

 Legal

• Title report
• Obtain Certificates of Occupancy, any appraisals, and all relevant contracts
• Insurance quote
• Zoning information, approvals, and permits
• Licenses and warranties
• Property management matters

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Resources for Due Diligence Checklists:
https://propertymetrics.com/real-estate-due-diligence-checklist/
https://safetyculture.com/checklists/real-estate-due-diligence/
https://www.tylercauble.com/blog/commercia-real-estate-due-diligence#checklist

References:
Junaid, J. (2024, February 16). How to conduct a due diligence for commercial real estate. Property Management Blog | SnapInspect. https://blog.snapinspect.com/how-to-conduct-a-due-diligence-for-commercial-real-estate/