Real Estate Due Diligence Template
The Real Estate Due Diligence Checklist provides a framework of initial due diligence requests. These are tailored specifically to transactions involving commercial real estate spaces.
What Questions does Real Estate Due Diligence Checklist Include
Likely if you are investing in commercial real estate you are interested in the physical property or location itself. Appraising and inspecting the property’s specs, features, and physical space is integral to closing a real estate deal. It helps you accurately assess value and discern if it will be a profitable investment. Data required includes roofing and HVAC information, environmental reports, and conducting or ordering in-depth inspections.
ITEMS IN PROPERTY INFORMATION DUE DILIGENCE INCLUDE:
Often times, commercial real estate is more than just a property; it’s a business. What this means is that aside from just purchasing the physical space, you could also acquire a bundle of employees, vendors, and other relationships. With that in mind, you need to confirm that everything is healthy and complaint on the business side of things. Data required includes employee metrics and information on the company’s relationships with employees and vendors.
ITEMS IN OPERATIONAL INFORMATION DUE DILIGENCE INCLUDE:
Zoning laws dictate the rules and regulations that govern building, remodelling, or utilizing your space commercially. However, these laws change constantly. Performing survey, title, and zoning due diligence will help you certify that everything is up to date and in working order. It will also help you learn more about any potential restrictions that are unique to your property. Data required includes zoning reports, surveys, covenants, restrictions, and easements.
ITEMS IN SURVEY, TITLE, AND ZONING DUE DILIGENCE INCLUDE:
If the target property is one that leases to tenants, you will want to do a thorough investigation of them and their leases. This will help you get to know your new customer, help ease the transition of new ownership, and give you a better scope of each parties’ responsibilities. Most importantly, you want to verify all of their leases, security deposits, etc. with a keen eye on financials. Some documents needed here are leases, amendments, and rent rolls.
ITEMS IN TENANCY DUE DILIGENCE INCLUDE:
The last thing you want to walk into when engaging in a new investment is walking into a sticky web of legal issues. Conducting this type of due diligence will ease the transfer of ownership and safeguard from potential issues. Elements needed here include litigations, insurance policies, and a team to help transfer any trademarks.
ITEMS IN LEGAL; CONTRACTS; AND INSURANCE DUE DILIGENCE INCLUDE:
As with any other investment, financials are key in valuing an investment, especially if the property owner is already claiming that it is profitable. Nonetheless, financial due diligence helps piece together the full picture of your investment and protect against unexpected problems down the line. Items here include income statements, expenditure history, and expenses.
ITEMS IN FINANCIAL INFORMATION DUE DILIGENCE INCLUDE:
Similar to legal, contracts, and insurance due diligence, governmental helps you verify that the property is compliant with jurisdictions and environmental regulations. Additionally, researching and obtaining all necessary licenses and permits promote a smooth transition and helps prevent other legal troubles. Items to investigate here include governmental and environmental regulations and any administrative proceedings.
ITEMS IN GOVERNMENTAL DUE DILIGENCE INCLUDE:
This real estate due diligence questionnaire was created by and for M&A professionals and includes a comprehensive starting point for any diligence process. Every deal is different however and may require additional requests or diligence areas.
This real estate due diligence template can be easily downloaded and utilized as just the Excel sheet. However, it is most effective when paired with DealRoom’s dynamic due diligence software. We offer a secure space to conveniently request, collect, and house data. Additionally, DealRoom offers analytics, security features, and customized help to streamline the process. We are confident that with DealRoom you can close deals up to 40% faster.