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How do you perform due diligence?

On Behalf of | Nov 4, 2019 | Firm News

In Arizona, if you are acquiring commercial property, it is crucial that you understand every aspect of the property that you buy. Commercial real estate is an investment that you would normally plan to make a return on, so it is crucial that you do not have any extensive problems. To investigate for potential issues, Medium.com calls this due diligence. Due diligence will inform you on all of the potential liabilities that you might acquire. 

First, you need to examine the legal description and current title of the property. The title search will tell you if the property is free and clear. The title search allows you to view public record. In addition, you should look at the survey and legal description. This may sound similar to residential real estate, but there are a few more elements involved. 

Do you know if your property meets the zooming rules and ordinances? Make sure that the property has a Certificate of Zoning Compliance. In addition, if the building has any tenants, you have to be aware of any terms and conditions that govern said tenants. You assume the owner’s rights and responsibilities when you close the property. 

If there is any income that you will receive from the property, you need to research it. This means that if there are tenants, you would obtain the rent roll for the 12-month period. You would also need to review any real estate tax bills so that you can estimate your future bills. 

None of the above is meant to be legal advice. It is for educational purposes only.