Purchasing commercial real estate is a major investment. As such, you want to do everything you can to protect your interests. While this certainly means negotiating a purchase price on terms that are favorable to you in both the short- and long-term, there are other factors that you have to take into consideration. After all, if you move too quickly through your real estate transaction, you could end up facing significant problems later.
The importance of due diligence
One of the best ways to protect your investment is to ensure that you’re conducting due diligence prior to finalizing you deal. Here, you take a comprehensive approach to analyzing every aspect of the property so that you know exactly what you’re getting into and can negotiate the terms that are right for you. Failing to perform due diligence could lead to unexpected but otherwise avoidable financial issues and land-use problems in the future.
What goes into due diligence?
Due diligence addresses every aspect of the property. Each of the following will need to be taken into account if you want to fully protect your interests:
- Current tenants
- Existing lease agreements
- Zoning restrictions
- Existing and potential liens
- Encroachments
- Easements
- Tax implications
- Location
- Environmental issues
- Landscaping issues
- Structural components, including electrical and plumbing systems
- Existing liabilities
- The property’s historical revenue streams
- The cost of maintenance and repairs
- Any other restrictions on use
These are just some of the many factors that you need to take into account before signing off on a purchase contract. So, be thorough in assessing every aspect of the property before moving forward with your real estate transaction.
How to conduct due diligence
That may seem like a lot to look into. So, how do you go about conducting due diligence? To start, you want to conduct numerous walkthroughs of the property to gauge whether the location of the property suits your needs and whether you think any other improvements will need to be made in order to render the property viable for its intended use. You’ll also want inspections conducted to identify any other issues with the property. Zoning regulations will need to be scrutinized and lease agreements and payment history will need to be assessed. You may want to bring in experts who can give you a realistic idea of the costs associated with needed changes so that you can sit down at the negotiation table with a realistic view of what it’s going to take to get the property to where you need it to be.
Gather documentation
You’re also going to need to make sure that you gather proper documentation to show that you’ve conducted due diligence. These records include those pertaining to title searches, but you’ll also want to make sure that you’re addressing issues such as compliance with the Americans with Disabilities Act. If you don’t secure the records that you need, then your real estate transaction could be significantly delayed, and you may end up facing legal trouble down the road.
Do you need guidance with your real estate transaction?
Commercial real estate transactions can be complex. But if you don’t competently navigate the process, then you may end up with more than you bargained for. That’s why experienced law firms like ours stand ready to help guide you through the process, ensuring that your interests are protected throughout.
So, if you’d like to learn more about commercial real estate transactions, the due diligence process, and what an experienced real estate attorney can do for you, then now may be the time to reach out to the firm that you think is right for you.