Real estate remains a solid investment. While there have been some wild swings in commercial properties in recent years, with shifts to online shopping and remote work, there are some promising signs that rental income is surging again.
This is a good reason to be optimistic, but it also means greater competition. It is imperative to determine the value and income potential of a commercial property before buying it.
This article covers some commercial property due diligence strategies. It will help you determine how to set priorities and get the most return for your investment. Keep reading to learn more.
Physical Inspection
One of the first things you should do during a due diligence period is physically inspect the property. Line up professional contractors and engineers to examine the building's structure and systems. These include the following:
- Plumbing
- HVAC
- Electrical
- Grounds integrity
- Infrastructure
Beyond that, take an inventory of any immediate repairs and maintenance the property will require to get it on the market. This includes everything from landscaping, painting, lighting, and feature upgrades.
Legal and Title Review
The due diligence period is a time to ensure all of the legal aspects of the property are in order. These include surveys, deeds, zoning ordinances, leases, and environmental reports. Also, look for any liens or encumbrances.
Evaluate the property and liability insurance policies. See if it needs any special insurance coverage due to unique hazards. This will help protect you against any unexpected losses or liabilities down the road.
Market and Financial Analysis
The next step is to take a close look at the local market if you have not already. That means an examination of current rental and vacancy rates. This will give you a better understanding of what prospective tenants value.
Be sure you are comparing apples to apples. Look at other properties with comparable square footage and amenities. This will give you an idea of any upgrades that need to be made to ensure you attract and retain tenants.
Leverage Professional Expertise
One of the easiest yet useful things you can do is to hire professionals to handle commercial property due diligence processes. This ensures that nothing gets missed and you have as much information possible going into the final chapter of the real estate deal.
Also, it frees up a great deal of time that you would otherwise be spending on all of the endeavors described above. A professional property manager will have the legal, financial, and real estate experience to know what needs to be done.
Learn More About Commercial Property Due Diligence Strategies
Now that you know what steps to take during a commercial property due diligence period, you can determine the best course of action. Keep in mind that a professional property manager can guarantee that the buying process goes smoothly and that you have all the data you need to make the most informed decisions possible.
PMI Gatekeeper provides residential and commercial property management services to the Cincinnati area. We offer property assessments, marketing, tenant management, accounting and reporting, and more. Sign up for a free rental analysis today.
