The Corpus Christi downtown area growth is explosive, with $2.2 million in incentives getting approved for five large projects. This can make the area enticing for commercial real estate investors. However, this does not mean you should buy commercial real estate blindly.
You must perform commercial property due diligence before completing a financial transaction. This will protect your significant investment. This quick guide will show you the steps to perform due diligence.
What Is Due Diligence?
Due diligence is the phase that happens after you sign the contract for a prospective investment. This phase of the process typically takes 30 to 90 days. It allows the buyer to perform a commercial real estate audit.
During this time, several tasks take place:
- Potential issues identified
- The provided information verified
- Market conditions analyzed
The buyer is not obligated to complete the sale if the property does not pass the due diligence checks.
Before purchasing real estate, a legal documentation review must take place. This step verifies that the commercial property is in good standing for sale. You will confirm that the seller is the rightful owner and can sell.
This phase also includes a search for potential encumbrances, such as liens. Additionally, a title check will look for other possible claims to ownership from third parties.
If the commercial real estate is already developed, tenants could be on the property. If this is true, you must review the related financial records. This will involve inspecting the tenant leases for profitability and status.
A property manager with experience managing commercial tenants can provide valuable insight here. They can identify tenant status or possible unfavorable lease terms.
You should not buy commercial real estate in an unfavorable market. A property management company can provide you with a detailed marketing analysis.
Hire a professional property inspector to go out and prepare a report on the property. This verifies the boundary lines, placement, utility hookups, unique features, and easements.
An environmental inspection is a must for modern commercial real estate development. This will look at the current condition of the property and the potential impact of development.
Hidden environmental issues can result in significant costs. These could hinder or completely halt development.
Planned Use Approvals
Just because you buy commercial real estate does not mean you can do whatever you want with it. Zoning laws and local ordinances can restrict your ability to develop land. You must check local Corpus Christi ordinances and regulations.
Verify that you can develop and use the property as you wish. Sometimes, you may need to request a zoning waiver or change to accommodate your intended use.
Commercial Property Due Diligence
Before you buy property, you must perform commercial property due diligence. This will protect your investment and prevent you from buying land you can't develop. Working with a property management company can make performing due diligence smoother.
Contact our team today and let our experienced property managers help you with commercial real estate due diligence.