If you are buying a commercial property of business for the first time, or even if you have engaged in many such transactions, it is important to engage in proper due diligence. Many people – including many people involved in commercial transactions, but especially newcomers to the field – do not fully understand the purpose of due diligence or what it should entail at its most effective. While most commercial buyers, whether of real estate or businesses, understand that due diligence is a process that helps them evaluate a property, many view the process as a means to ensure they are not paying too much. That is part of it, but there is much more to it, and to conduct proper due diligence requires a better understanding of the information you hope to discover during the process.
Investing in commercial real estate can be challenging. You have to make decisions based on data, not what property you “love.” You need to understand what commercial purpose best suits that particular property, whether it be retail, residential, mixed use, or even industrial. You need to understand how to handle the property’s existing tenants and what kind of tenants you will want to seek going forward, as well as how to find and attract those future tenants. Above all, though, you need to know how to avoid the many pitfalls that lurk in the commercial real estate world.