What does commercial due diligence mean?

[Account Closed]

When you investigate a commercial property what aspects do you consider? What is important to you when determining which properties to buy or not buy?

[Darryl Dahlen]

As someone who works in commercial finance, there are a lot of factors that one should consider if they need financing.
Just some of those include:
-Verification of historical financials. That means requiring audited financials.
-Looking at any leases in place with regards to term, exit clauses, and if they are N, NN, or NNN.
-Are there any environmental factors? Do you need to have a phase 1 done?
-Are there any market conditions with regards to saturation/absorption?
-Is the debt service ratio sufficient to cover debt?
-What is the NOI and does that number support the value?
-Is there a competent property management company in place?
-Is there any deferred maintenance or immediate repairs needed?

I could go on, but I think that list covers a lot of the basic items one should think about (if they are applicable that is).