Due Diligence: Do Your Homework By Tony Seruga, Yolanda Seruga And Yolanda Bishop At Isnare.com Ezine Articles

One of the most important things that you need to remember when evaluating commercial real estate, is due diligence. Due diligence is a special phase in which you take the time to investigate and analyze all details of the property you are considering. It is imperative that you take the time to do your homework at this stage in the game or you may later find some problems.

Reasons to Perform Due Diligence

Due diligence is extremely important, and there are many reasons that you need to be sure that you don’t skip this important step in the process. The following are a few different reasons that you need to perform due diligence before you purchase any commercial property.

- Reason #1 – Determine True Condition – One of the most important reasons you need to be sure to perform due diligence is to be sure that you know the true condition of the property you are considering. It is important to inspect every part of the property, from the history of it to the present day status of the property.

- Reason #2 – Make Sure You Can Use as Planned – It is also important to do due diligence to be sure that you can use the property as you have planned. Make sure that it is truly what it appears to be so that you don’t get stuck with a property you can’t even use like you planned on.

- Reason #3 – To Find if There are Any Deal Killers – Sometimes you may find some deal killers while you are doing your due diligence. It is important that you find out about these before the purchase is final. If you find a deal killer now, you can walk away, but finding it later could be a disaster.

- Reason #4 – Find out About the True Value of Assets – When doing due diligence, you need to be sure and find out about the true value of the assets. You also need to be sure that they comply with the criteria of acquisition as well.

When to Perform Due Diligence

It is important that you perform due diligence as soon as you can on a property. However, due diligence is not something that just stops there. It is important that you continue to perform due diligence as you pursue the project even further. There is always a time for due diligence, from the beginning until the very end of the project. Before you even start your due diligence, be sure to come up with a list of tasks that you are going to have to do with the particular property you are dealing with.

Due Diligence is Important to Success

If you want to succeed in any commercial real estate project, due diligence is going to be one of the keys to success. Unfortunately, if you are not thorough at performing due diligence, it can come back to haunt you later. When you do due diligence, you may find some issues that you may not have been obvious in the beginning. Due diligence can help you to make an educated and informed decision as to whether you should go on with the project you are working on or whether you should walk away from it.

A Few Due Diligence Tasks to Remember

It is so important that you perform your due diligence on every project that you undertake. Of course there are quite a few different aspects of due diligence which may depend on the project you are undertaking. Even if you don’t have the time to do it all by yourself, then consider hiring someone to help you out. If you aren’t quite sure what tasks need to be performed when you are doing due diligence, then the following are a few that you may need to remember.

- Financial and Legal Issues

- Market Research

- Verification of Comps

- Approvals and Permits

- Dealing with City Planners and Zoning

- Environmental Research

- Absorption Rates in the Area

- Past History of the Property

- How Much Land is Actually Usable

- Any Repairs Needed

- Current Condition of the Property

Of course there are a variety of other things to check during due diligence, but these are just a few that will get you started. Yes, doing due diligence properly is going to take time and hard work, but in the end it will be well worth it. After you have completed the due diligence, then you can make an intelligent decision on whether you should purchase the commercial property or if you should walk away and continue your search.

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