he step some commercial real estate investors look to avoid is due diligence. This is primarily because the step involves a lot of hard work and can be tedious. However, this is a crucial step if you want to become a successful investor. The section below will speak to due diligence mistakes to avoid.
Incorrect Calculation of Property Values
You must do your homework when evaluating a property accurately. This means you must pull up sales comparisons, check similar properties in adjacent areas, speak to commercial brokers operating in the region, etc. All of these steps are crucial for calculating the value of a property correctly.
Misinterpretation of Underwriting Guidelines
Do you have plans to take out a loan and have already finalized the lender? If so, then you should avoid carrying out due diligence on a particular property. Allow the lender to do the job on your behalf.
After the amendment of real estate laws in 2008, federal restrictions have made it mandatory for every lender to act strictly when approving loan applications. So once you apply for a loan, the lender will automatically find out whether the property matches underwriting guidelines.
Assuming That the Lender Would Accept Third-Party Reports
Individuals planning to buy industrial property in Kansas should not use any third-party report to woo lenders. This rule applies to all kinds of due diligence including appraisal reports, environmental reports, condition assessments, etc. Instead, these people should speak to their respective lenders and find out whether they have any preferred inspector, engineer, or appraiser who can prepare the required reports.
This will ensure you will not need to spend more money to obtain additional reports from professionals recommended by the lender.
If you can avoid the mistakes above, your chances of earning a good return on investment could be high. You can work with an experienced real estate broker or brokerage firm to make the process much easier.
