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Commercial Real Estate Inspections

Nov 14, 2007
Buying commercial real estate is much different than buying a single home. Because it is commercial real estate and you are apartment building investing, you can use a due diligence period to get the best deal possible. During the due diligence period, the buyer, at the buyers expense, has the right to enter the property together with anyone they choose in order to inspect the property. Tests such as those for environmental problems, the soil, the air quality, hydrocarbon, toxic chemicals, carbon, asbestos, lead based paint and any other tests the buyer may deem necessary for the commercial real estate property are then conducted. Apartment investing is something that needs to be thoroughly checked out before the sale so there are no surprises that will end with the loss of tenants and money because the structure isn't habitable.

Due diligence is a way for the commercial real estate investor to be certain there are no hidden problems. The process should be taken full advantage of every time a commercial real estate building is being considered. If you are a wise apartment building investor, you will be prepared for this and have experts to check for problems in the building. When one is found, the selling price may be lowered or you can request that the seller make the corrections prior to the sale.

This is similar to purchasing a used automobile. If you haven't taken the time to have a mechanic look it over prior to purchase, you may find out too late that there are major problems with it. The same thing can be said for apartment building investing. This due diligence is a time given for just this purpose, and it's crucial that it be used as such.

There can be many unseen problems when buying commercial real estate. A seemingly small problem such as lead paint can mean that until this paint is removed by professionals who are licensed to handle such a job, no tenants will be allowed to live in the building. This means that investing in a building such as this, unless it's at a price that reflects the problem, should be considered carefully. The apartment investing situation should be one in which the buyer is aware of all of the problems and can get a price that reflects the need to do the remodeling work on the units. When that is completed, the units can then be rented at a higher rate than previously. A good real estate investor will have had this planned out from the beginning.

Should you bring a professional to inspect something on the commercial real estate property, and they find a problem, there is the option of offering the current owner less, or even to back out of the deal altogether. Depending on the problem, it may cost very little to fix, or it may cost enough that there will be no profit possible from the building. Know which type of building you are getting into by exercising your due diligence.
About the Author
David Jackson is a real estate investor & author who has found a niche in apartment investing. Find out how you can buy apartments while being broke & with no money of your own at http://www.mymassivecashflow.com. Register for his newsletter & claim a CD at http://www.freeapartmentbuyingtips.com
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