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The Importance of Performing Due Diligence Before Purchasing Commercial Property

Investing in commercial property is a way to increase an investor's financial well-being. To reduce risk and ensure the likelihood of making a sound investment, the wise investor will complete a thorough due diligence process before making an offer.
 
 
What is due diligence?

Due diligence is the process of conducting an investigation of a person (or in this case, a property) prior to signing a contract or completing the purchase of that property.

Why complete a due diligence?

Due diligence is a means by which you, the investor, can assess the physical and financial investment worthiness of a property. You or an agent acting on your behalf assembles data to build a "profile" of the property of interest. That profile will include information on:

  • Title and liens - Who actually owns the property and if there any liens placed against that property.
  • Registry of deeds - What are the current mortgage and most recent sale price of the property?
  • Costs - Current property taxes and expenses such as utilities and insurance.
  • Zoning, permits - How is the property zoned? Can it be expanded and/or converted to something else? Identify the setback regulations, the town's classification of the property and any pertaining limitations. What permits have been pulled for work done on the property?
  • Survey - A survey of the land and any improvements made to it will identify encroachments and physical uses not shown on the title. The survey will show encroachment and whether the property's "scope of use" as stated in the recorded document "is acceptable based on its location."
  • Inspection - A thorough property inspection is essential to identify the condition and sufficiency of the structure. The inspection should cover all structural components, HVAC units, the fire repression system, and should document any regulatory or statutory violations.
  • Zoning - Confirms the proper zoning usage, any current or potential violations, agreements (like growth management agreements, covenants, public facilities agreements and current/proposed fees, etc.).
  • Leases - If the investment means assuming existing leases, all existing leases should be evaluated.
In addition...

Nothing takes the place of actually inspecting the property and the area, meeting with other owners and renters, and getting a feel of the community in which, the property is located. You also will want to know what the city has in mind for the development future of your property neighbourhood.

Is the community thriving, are more people (including businesses) moving out of rather than into the area? What are current rents in comparable properties and what have been the recent sale prices of properties similar to yours.

It all matters

The information you gather through the due diligence process will give you a profile of financial well-being (both property and community). You will have a better sense of the current and potential profitability, and whether the property of interest is well-, over-, or under-priced.

Each piece of information will help you assess the viability of your investment, avoid a costly mistake, and potentially shield you from getting caught up in legal or financial problems not of your making.

Due diligence is time-consuming but well worth the investment when it also enables you to determine the negotiation boundaries, identify the risks, or provide the "all clear to invest" signal to proceed with a wise investment.Due diligence is imperative when you are dealing with unknown people, for that matter, it is advised in real estate to invest with big names, who have the reputation of delivering best with best terms and conditions. With that in mind, if you are looking for Best Commercial Property in Noida, we suggest you to explore and invest in Anthurium. Anthurium is a business park exclusively designed in sector 73, Noida for businesses who believe in delivering productivity and efficiency. Once you have invested with Anthurium, you’re ready to action your business growth strategy with confidence.

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