Due diligence gives buyers the opportunity to fully inspect a building, both physically and otherwise, to ensure they don't get saddled with unexpected problems later on.
Like the famous adage “let the buyer beware” suggests, anyone interested in commercial property investing should take the time for due diligence so they make an informed purchase.
Importance of Due Diligence When Investing in Commercial Property
Whether buying an office building, warehouse, or rental homes, the one thing that all those looking for commercial property for sale must do is inspect the property to assess exactly what they are buying.
This usually begins with a physical inspection of the commercial property; however, it should include much more.
The process of due diligence should include a deeper inspection of everything from zoning laws and floodplain maps to property boundaries and compliance with local access laws.
Anyone interested in commercial property investing must perform a full background check on a listing before signing any contracts, as there could be outstanding but unidentified legal issues.
Without knowledge of these issues and how they must be resolved, a buyer could end up sinking their money into a building they won’t be able to use as planned.
A building could also require extensive repairs or renovations they are not prepared to finance. Basically, there is no way to know exactly what the buyer is actually getting without doing due diligence.
Due Diligence Points to Consider Before Buying
Every potential buyer of a commercial property for sale is entitled to a period of due diligence before the sale is actually made.
Buyers are warned to use this time wisely and do necessary research on a variety of important points such as:
- Liens, Claims, Encumbrances, and Lawsuits - Are there any legal claims or lawsuits against the current owner concerning the commercial property being sold?
- Tax and Insurance Violations or Increases - Are there any violations to tax or insurance laws concerning the property; will current tax and insurance rates be changing if the building changes owners?
- Access for Utilities and the Public - Is there sufficient required access, including handicapped access and parking, for the public and utility providers? These are important details that could seriously affect commercial property investing if expensive renovations are legally required before the building can be used.
- Zoning, Flood Plains, and Boundaries - What is the size and location of the property and what can it be legally used for? Many buyers are surprised to learn they can’t do what they want with a building or that there are boundary issues.
- Existing and Necessary Improvements - Have existing improvements been made according to code and well maintained? Will any improvements be required in order to use the building for its intended purpose?
- Environmental Concerns - Does the property pose any environmental threats due to its past use, manufacture, or disposal of toxic or hazardous materials and will any site cleanup be required?
Based on the above points, it should be easy to see that the due diligence of commercial property is more than just a building inspection.
Be Aware of Commercial Property Issues Before You Buy!
These are factors that can turn anyone’s dream of commercial property investing into a nightmare if they are unaware of these types of problems before they sign on the dotted line.
Beyond financing and choosing the right location, due diligence of commercial property for sale is one of the most important issues that all property buyers should plan for to ensure future success with their investment!