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The importance of due diligence in commercial real estate

On Behalf of | Feb 25, 2021 | Uncategorized |

Commercial real estate can be a major investment. The right property can generate a lot of income, but the wrong property can be a deadweight, financially speaking. So, before you put your financial wellbeing on the line, you need to make sure that you know what you’re getting. That’s where performing due diligence comes in.

Due diligence in commercial real estate

In its broadest terms, due diligence is the process whereby you investigate and analyze every aspect of a piece of real estate so that you know what you’re getting before signing off on a purchase agreement. While issues like the physical location of the property and its surrounding neighborhood may weigh on your decision whether to purchase it, there are other matters to take into account.

Due diligence should be extremely thorough. You’ll want to think about looking at existing leases to determine what income might look like and the types of clientele you might be dealing with, and knowing about applicable zoning laws can ensure that you’re not prohibited from conducting your business operations in the future. You’ll want an inspection to uncover any issues with plumbing, electricity, and structural integrity, and you’ll want to make clear how future construction and upgrades will be handled. These are just a handful of the plethora of matters that you’ll want to address before purchasing a piece of commercial real estate.

Using the results of due diligence

While the results of your investigation can help you decide if you want to purchase a piece of property, it can also help you during negotiations. You might be able to negotiate a lower purchase price or place contingencies on the purchase that will leave you in a better position once you take possession.

If you want to protect your interests as fully as possible, then you really need to know the law and how to use it to your advantage. If you think that you could benefit from assistance in this regard, then you might want to reach out to a legal professional who you feel is knowledgeable and experienced enough to represent your interests.