Buyer and Investor Due Diligence

Two key aspects of due diligence for purchasing or investing in real estate are evaluation of leases and evaluation of risk and obligations that will be undertaken upon purchase of the property. For a tenant occupied property, the property’s value is directly related to lease terms. Accordingly, investors and buyers alike will want to know each tenant’s rent obligations, the lease term and any termination rights, authorized uses, and any other tenant rights that may be objectionable or counterproductive to the prospective purchaser or investor’s intended use of the property. Additionally, buyers and investors will want to evaluate whether the property may be lawfully used for the intended purpose as well as any obligation that will be assumed upon purchase of the property. This can include utility agreements, janitorial contracts, and other agreements that directly impact expenses and bottom line profits.