The 20th Annual Business Rankings Report, released in 2024, once again named Texas as America's top business climate. The Lone Star State is also home to 54 Fortune 500 companies, more than any other in the nation.
While it may be one of the best places to buy commercial property, take your time before you do. The adage of "don't judge a book by its cover" is also one of the best property investment tips. Look into everything about a commercial property before you sign on the dotted line.
Read on to learn three key steps in commercial property due diligence in Austin, TX.
1. Financial Analysis
Start by examining the local market. Is there local demand for this type of property?
Review all the property's financial documents, including:
- Operating statements
- Profit and loss statements
- Current leases
- Historical financial performance documents
- Audit rent rolls
- Property tax bills
These documents are essential to commercial property due diligence. It helps you see how the property has performed in the past and will in the future. A property valuation adds to the data they provide to determine if the property is a worthwhile investment.
2. Physical Inspection
A thorough physical inspection is one of the most important parts of any commercial real estate checklist. It'll help you identify any physical defects or necessary maintenance or repairs that could affect its value.
Get an environmental inspection as well. It'll identify any contamination risks or remediation needs.
Make any physical real estate evaluation as thorough as possible. Doing more than one is also a smart move. It's easy to miss an important issue that could make the property uninhabitable or even illegal to rent.
3. Legal Inspection
Your due diligence checklist must also include checking that the property meets all relevant legal standards so you don't get hit with a nasty penalty.
Define a legal description of the property. This includes defining its boundaries as well as defining areas such as:
- Building type
- Square footage
- Number of floors
- Parking availability
- Amenities or special features
Make sure that it's compliant with current zoning laws and regulations. They need to match what you're intending to use the property for, whether your overall goal is:
- Office
- Residential
- Mixed-use
Check for adherence to ADA Standards for Accessible Design via an accessibility survey. It'll help you determine if the property is compliant and what you'd have to do if it's not.
Look at the title to check for any current leans. Get title insurance to protect yourself from problems such as easements or boundary disputes.
Where to Get Help With Commercial Property Due Diligence
Commercial property due diligence involves checking a property over to ensure that it's a profitable investment. You'll notice any financial, maintenance, or legal issues before they become major. You'll also avoid getting locked into an agreement on a property that isn't worth it.
PMI Heart of Texas is a full-service property management company serving residential and commercial property owners and homeowners' associations. We'll take over every part of the process.
Contact us to get started finding the best commercial property for you today.
