Ultimate Due Diligence Guide for Commercial Real Estate Acquisitions
Comprehensive Due Diligence Checklist
Due diligence is an integral, intricate, and essential phase in every commercial real estate acquisition scenario. As an investor, your goal is to carry out a thorough review, ensuring no aspect is overlooked. You need ample time to review and analyze all documentation and discern potential risks associated with the property, title, zoning, financials, tenant relations, and various other factors.
To assist you in this critical process, we've formulated the following checklist. This list encapsulates a majority of the crucial documents, records, and financial data that form the core of an in-depth due diligence exercise for potential real estate investment. Many times a recommended best practice is to incorporate a checklist into your sales contract, insisting that the stipulated due diligence period not start until the seller has furnished every listed deliverable.
The fundamental objective here is that, as a potential property purchaser, you should be fully equipped with all essential documents before commencing an extensive due diligence process. This checklist is designed to be a reliable guide for businesses branching out into independent locations or seasoned developers overseeing multi-site acquisition due diligence, empowering you to make the most educated decision on your forthcoming real estate acquisition.
Seller's most recent title policy or title commitment on the property, along with all associated documentation.
Latest ALTA survey and topographic study, and a duplicate of the construction blueprints, architectural plans, and/or as-built diagrams.
Copies of all permit(s), ADA compliance, and certificate(s) of occupancy.
Copies of all contracts, invoices, and permits for major capital improvements completed on the property.
Copies of previous appraisals completed on the property.
Copies of previous inspections completed on the property, including current condition of all major components and systems such as roof, parking lot, structural components, mechanical, electrical and plumbing systems.
Legal description of the property confirmed with title.
Zoning Compliance Certificate, including all zoning approvals (variances and any pending applications).
Declaration of covenants, conditions, restrictions, reservations, and easements.
Seller’s third-party engineering and environmental reports, including Phase I and II reports, no-further-recommendation letters, geotech/soils test, mold abatement reports, and underground storage tank tests.
Complete written lease copies and associated guarantees, verifying that no oral leases or understandings are in place.
Estoppel Certificates confirming all in-place lease terms.
Accounting of all rent, other income sources, common area maintenance (and associated maintenance and/or management contracts), security deposits, and tenant-paid operating expenses and real estate tax contributions.
Relevant financial details, including all security deposits and any other amounts owed to any tenant, vendor, or other party.
Past three years' real estate tax bills, with special assessments or incentives, and tax protests.
Prior two years’ utility bill copies.
Full, correct version of each written service contract, and summary of each oral service contract.
T-12, T-24, and accounting of all income and expenses related to the property, including current rent rolls, as well as collection and tax reports for the past two+ years.
Lists of all personal property linked to property operation and maintenance, and all permits, certificates of occupancy, warranties, government notices, special assessments, code violations and valid guarantees.
Copy of current insurance policies, certificates and any pending claims against the property.
Details of insurance claims made in the last five (5) years.
Schedule of pending litigation impacting the property or seller’s capacity to transfer the property.
This detailed due diligence inventory aims to aid you in obtaining all pertinent information required to make an informed decision regarding your potential investment.
At Realty Capital Analytics, our expertise spans across real estate financial modeling, fund modeling, asset management strategies, creative deal structuring, syndication consulting, and pitch book preparation. Our seasoned team is dedicated to offering tailored solutions that enhance value and optimize outcomes for our clients. We invite you to leverage our comprehensive services for your real estate investment needs. Contact us for a complimentary consultation, and let's discuss how we can support your objectives with precision and professional insight.