The commercial real estate market in Milwaukee is in a period of adjustment. Downtown is thriving, but lower-quality spaces have high vacancy rates.
You need to choose your property investments carefully. How do you know if you're getting a good deal?
Commercial property due diligence is essential. It's the best way to uncover the details of a property to make an informed decision about whether the property is a smart investment.
Due diligence helps protect against unexpected financial losses. You're in a better negotiating position because you know the possible risks.
Learn more about how to conduct an investment property evaluation and why due diligence is so important.
Timeline for Commercial Property Due Diligence
The due diligence period can range from 30 days to 120 days or more. The time frame varies based on the details of the transaction and your bargaining position.
Due diligence may begin before you sign a purchase agreement. This can reveal that a property doesn't meet your needs before you invest time and money in negotiating a purchase agreement.
On the other hand, the seller may get a better offer and enter into a contract with someone else. You can reduce this risk with a no-solicitation clause in your letter of intent.
The purchase agreement should describe the due diligence process, including:
- What can or will be done
- Whether the buyer or seller will perform each task
- Whether the buyer or seller is responsible for associated costs
- Timeline for completion
You also want the right to leave the transaction if the due diligence process reveals that the property isn't a good fit.
Due Diligence Checklist for Commercial Real Estate
A property inspection checklist helps ensure you don't miss any relevant information. You may want to start with a preliminary checklist. This can help you find any major issues before you commit too much time and money in the deal.
Preliminary Investment Property Evaluation
The first phase of due diligence should include items such as:
- Current title policy
- Development and construction plans
- Property condition report
- Permits, occupancy certificates, and other government-issued documents
- Property tax bills
- Energy and utility bills
- Capital expenditures
- Environmental reports
If the property meets your requirements at this stage, you can move on to a more detailed commercial real estate analysis.
Site Underwriting Analysis
The site underwriting process involves a deeper investment property evaluation. This part of the due diligence checklist includes:
- Financial analysis
- Insurance policies and claims
- Legal analysis
- Title, zoning, and surveys
- Restrictions on use, like covenants or easements
- Building plans and reports
- Tenant information, lease agreements, and vacancy rates
Attention to detail makes the due diligence period take longer, but you'll have a more accurate view of the possible risks and returns of purchasing the property.
Purchase Commercial Real Estate with Confidence
Commercial property due diligence is an essential part of the real estate transaction. It helps you find a property that will bring the best possible return. You strengthen your negotiating position and lower your risk.
When you need a property management company for commercial real estate, you can trust PMI of Greater Milwaukee. We use state-of-the-art technology to keep you informed about your investments. We're dedicated to helping you maximize profitability without sacrificing quality.
Schedule a consultation with PMI of Greater Milwaukee today to discuss your commercial real estate needs.
