Due Diligence When Acquiring Commercial Real Estate

Posted on September 21, 2017

The long list of priorities an investor must consider before vetting and closing on the purchase of a commercial property requires extreme attention to detail.

Buyers will find it exceedingly beneficial to work with experienced real estate professionals through the often complex due diligence process. These specialists have the proficiency to identify potential issues and inconsistencies that may require further analysis and help to reaffirm that the property will indeed meet the buyer’s current and future needs.  In addition to the standard legal and financial due diligence steps, real estate pros can help buyers manage for the following essential elements to a property acquisition:

• The value of the underlying real estate: Whether buying land for future development or an existing property, buyers must understand the true value of the underlying real estate based upon such things as the zoning, marketability and desirability of the property location; property improvements; property tax assessments; and restriction on future land or property use.
• The current tenants, their credit quality and lease terms: What are the tenants’ current lease terms and options for renewals? Who is responsible for paying utilities, taxes and property maintenance costs? Are tenants corporate-owned or a franchisee locations? What are tenants’ average unit volume and rent to sales ratio?   What is the historical and current rent? How would a prospective buyer replace a departing tenant?   How desirable is the rentable property to other tenants?
• Land use: Are there limitations to the land-use rights? Does anyone else have potential claim to the underlying property? Are there environmental issues that need to be addressed? Are there covenants, use restrictions or easements for the property? Are there limits to expansion?
• Other relevant considerations: Are there nearby construction projects or changes in city services, traffic patterns or neighborhood demographics that can affect the success of your property?

 

The professionals with Orion Real Estate Group work with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.