Top 5 Due Diligence Mistakes Made in Commercial Real Estate

It’s really a long and complicated process to find an ideal retail space for your business, and if not pursued properly, it can cost you a lot of money and end up somewhere else. So, when it comes to leasing an office space or any other commercial space for your business, it is very important that you have a strategy and make sure you make a good decision based on the needs of your company. Here are some of the most common due diligence mistakes that tenants should watch out for.

  1. Incorrect property valuation: A more common mistake tenants make when renting commercial space is that they don’t value the property correctly. This could lead to many misunderstandings that would ultimately lead to the wrong deal. So make sure you’re really conservative when it comes to signing a deal. Check for sales competitors and other properties available on the market by contacting the most active commercial agents.
  2. Not understanding the lender’s underwriting requirements: Before spending your valuable time, money, and energy on due diligence, make sure you have a prior discussion with lenders about the loan amount they would make on your property. Because, these days, lenders have been very conservative and consider many things like physical condition, intended use, comparable sale and lease, environmental issues, etc. So check with the lenders before you go too far down the road.
  3. Do not check if the property complies with: These days, it is not at all uncommon for a buyer to know that the property does not meet construction requirements after purchasing it. Buyers usually find out when the city inspector comes to check for a heart attack associated with the property. Therefore, it is always a good idea to have an architect, planner, or contractor inspect the property and discuss compliance-related issues during the due diligence period.
  4. Assuming there are no problems: Typically, buyers or renters in a rush to get into a property make this mistake. They just want to settle in a space that makes them assume that there are no problems. But sometimes leases can have traps like hire provisions, cancellation provision, fixed option rentals, etc. As a tenant, you should be aware of these provisions, as they can put you in a bind and devalue the property. So if you are not familiar with the commercial real estate leasing, it is good to have an attorney who can help you read the lease.
  5. Do not spend time on the property: When you are about to buy a property or lease it, it is not enough if you give it a soft glance as it is something that has a great impact on your business. Make sure you do a full round by going there at different times of the day; This gives you a better idea of ​​what is going on on the property. Sometimes you can also change your mind and the decision to buy the property. Not only will you know what is hiding; It could be mold or fire problems in some units, to name a few. Spend enough time at the property and make sure it is ideal for you.

Many commercial real estate investors are unaware of the things they are unaware of! The points mentioned above will surely give a brief idea and also know the things to follow while looking for a commercial space to establish your business.

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