Commercial Real Estate Due Diligence Checklist

Here is a due diligence checklist from Unique Properties, Inc.
July 27, 2023

When buying commercial property, always look before you leap. The quality and condition of the property matter a great deal and can seriously impact your business’s success once the property is yours.

As with any real estate deal, the first step after choosing a property of interest is to complete a commercial real estate due diligence checklist. This process will check everything that might become a problem later, from the legal standing of the building to the condition of its foundation and fixtures.

What is Due Diligence for Commercial Real Estate?

Due diligence for commercial real estate is an important concept in the business world – it is the process of doing everything you can to avert future problems and to investigate the possibility of problems that could manifest. In commercial real estate, due diligence involves a series of inspections and legal research to ensure that the building and the title are in good standing before you agree to take ownership.

When Does the Due Diligence Process Start, and How Long Does It Take?

Due diligence typically takes place immediately after signing the purchasing contract – with the condition that the building must pass all inspections or else the contract is void, and you are not obligated to buy. However, you can negotiate to complete due diligence before signing the purchasing contract, and the seller may ask for confidentiality in return.

A commercial real estate due diligence process typically takes between 30 and 60 days. However, this may be longer or shorter based on the size of the building, party requirements, and if there are any scheduling delays.

Commercial Real Estate Due Diligence Checklist

Let’s go down the list of everything you should review for commercial real estate due diligence before you purchase a property.

Gather and Organize All Related Documents

First, have your team collect all of the documents related to the property, including the title, blueprints, inspection histories, tax forms, environmental reports, engineer reports, zoning documents, city records, and so on. Create a complete portfolio of the building.

Investigate All Documents

Ask a commercial real estate attorney to help you review the documents. Make sure the property is in good legal standing and, on paper, is in good physical condition. Don’t forget a title check.

Determine Financing Options

Speak with your lender of choice about financing options to purchase the commercial property. Lenders can be picky about property conditions and qualities, so it is best to assess your building before you try to secure funding – if you haven’t already.

Inspect the Property

Bring your inspectors. Commercial real estate due diligence requires an entire fleet of inspectors, including building inspectors, environmental inspection, an architect and contractor, a broker, and your favorite property manager. Get every possible professional assessment on why the building would or would not be a good investment and the possibilities if you choose to buy.

Collaborate with Site Consultants

Bring in specialist consultants beyond your typical inspection team. Get the soil, water, asbestos, and lead-based paint content assessed. Determine if traffic conditions are right for your business model. Make sure the foundation won’t flood, that you aren’t in a brushfire area, or that there are no pests in the grounds ready to infest.

Develop the Design & Use for the Property

Once you are assured that the property is in good standing, start building your plan. Work with your business managers and contractors to determine if and how you will renovate the space and put it to use. Will it become your next retail location or will you lease units to smaller companies? Complete your business model regarding the property and, with your new information, begin estimating your runway to profitability.

Resolve Any Related Legal Issues

Have the property and the seller legally investigated. Make sure you can buy the property free and clear without legal issues or liabilities.

Close the Deal

When your commercial real estate due diligence checklist is complete, you can close the deal and take command of your new commercial property.

Contact the Best Comercial Real Estate Brokers in Denver

At Unique Properties, Inc., we specialize in commercial real estate purchases. Our goal is to help you secure your next commercial investment, and we specialize in brokering unique locations whose potential is ideal for your unique approach to business.

Contact us today to access the best commercial real estate brokers in Denver and get started on your next commercial real estate investment.

Yuriy K/Shutterstock

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