Due diligence with regard to property refers to the careful inspection of the property before signing the contract. Property due diligence is important for buyers, sellers or lenders of property so as to assess the real condition of the property so that there are no hassles later on. Each kind of property has its own check points for due diligence. Here are some checks when purchasing a building or a hotel:
Building financials including expenses and income verification, how long tenants have been there, if they have been paying the rent, the annual rent increase and the leases from tenants. Also potential changes in neighboring properties should be checked.
The physical properties of the building or the hotel are an important aspect when seeking to purchaseit. These properties include road frontage, accessibility to parking space and public transport, distance to school (if residential units are in the building), topography and structural soundness of the building to avoid any potential liability issues. One must inspect thoroughly the physical condition of the building or the hotel, no matter whether it is new or old. Newer buildings might be having more problems than the older ones.
Due diligence in purchasing a property must also include checking for any legal problems, land problems or pre-acquisition problems. Also it includes if the title is clear and if there are any liens, litigation or insurance claims against the property. These problems must be clarified before proceeding to avoid hassles later on.
A broker will often help coordinate the following:
engineers, architects, appraisers, environmental analysts, mortgage lenders, an experienced attorney, insurance and inspection companies, management companies and contractors.
If you find any problems, you can either cancel this deal or re-negotiate the price.