It is really a long and complicated process to find an ideal commercial space for your business, and if not pursued in the proper way, it can cost you a lot of money and also end up in a contrary 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 should watch out for.
- Bad property value: One of the most common mistakes tenants make when leasing commercial space is that they do not value the property correctly. This could lead to many misunderstandings that would ultimately end in a wrong deal. So just make sure you are really conservative when it comes to signing a deal. Consult for sale competitors and other properties available in the market by contacting the most active commercial agents.
- Not understanding the lender’s underwriting requirements: Before you spend your valuable time, money, and energy doing due diligence, make sure you have a prior discussion with lenders about the loan amount 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.
- Not checking if the Property Complies: These days, it is not uncommon for a buyer to learn that the property does not meet the building requirements after purchasing it. Buyers usually 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 any compliance issues during the due diligence period.
- Assuming there are no problems: Usually 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 pitfalls such as contract clauses, cancellation clauses, fixed option rents, etc. As a tenant, 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 at it with disdain, as it is something that strongly impacts your business. Be sure to take a comprehensive 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 decision to buy the property. You will not only know what will be hidden; it can be mold or fire issues in some apartments to name a few. Spend enough time in the property and make sure that it is ideal for you.
Many commercial real estate investors are unaware of things they are unaware of! The points mentioned above 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 establish your business.
