It is really a long and complicated process to find an ideal commercial space for your business, and if not pursued in the right way, it can cost you a lot of money and also end up in the wrong place. So when it comes to renting office space or any other commercial space for your business, it is very important that you have a strategy and make sure that you are making a good decision based on the needs of your business. Listed below are some of the most common due diligence mistakes tenants need to watch out for.
- Incorrect property value: One of the most common mistakes tenants make when leasing commercial space is not valuing the property correctly. This could lead to many misunderstandings that would ultimately end in a wrong deal. So just make sure you’re really conservative when it comes to signing a deal. Check for sales competitors and other properties available on the market by contacting the most active commercial agents.
- Not understanding the lender’s underwriting requirements: Before you spend valuable time, money, and energy doing due diligence, be sure to have a discussion with lenders beforehand about the amount of loan they would put on your property. Because, these days, lenders have been very conservative and consider many things like physical condition, intended use, comparable sale and lease, environmental issues, etc. So check with lenders before taking it too far.
- Do not check if the Property Complies: These days, it is not uncommon for a buyer to learn that the property does not meet construction requirements after purchasing it. Buyers often find out when the city inspector comes to check for any heart attacks associated with the property. Therefore, it is always a good idea to have an architect, planner, or contractor inspect the property and discuss compliance issues during the due diligence period.
- Assuming there are no problems: Typically, buyers or renters who are in a hurry to get into a property make this mistake. They just want to settle in a space that makes them assume there are no problems. But sometimes leases can have tricks such as contract clauses, cancellation clauses, fixed option rents, etc. As a renter, you should be aware of these provisions, as it can put you in a bind and devalue the property. So if you are not familiar with commercial real estate leasing, it is good to have an attorney who can help you read the lease.
- Not spending time on the property: When you are about to buy a property or lease it, it is not enough if you look down on it, as it is something that strongly impacts your business. Be sure to get a thorough tour by going there at different times of the day; this gives you a better idea of what is going on there on the property. Sometimes you can also change your mind and the decision to buy the property. You will not only know what will be hidden; it could be mold or fire issues in some apartments, to name a few. Spend plenty of time in the property and make sure it’s right for you.
Many commercial real estate investors are unaware of things they are unaware of! The above mentioned points will surely give you a brief idea and you will also know the things that you need to follow while looking for a commercial space to set up your business.