Due Diligence


Due Diligence

When investing in commercial or industrial real estate, it is essential to perform a correct due diligence investigation. Understanding the due diligence checklist will help you to understand if you want to become legally bound to the property. The following information is a fundamental due diligence checklist.

Examining the Property

Commercial real estate is a separate area from residential real estate. The laws that protect you with residential real estate can seldom be used in commercial real estate. This means you are responsible for examining, judging, and testing the property for yourself. Several commercial real estate lenders will provide inspection services before you sign the final papers on the property. This is to protect the you and the bank as neither parties want to invest in real estate that could have a number of problems.

When investing in real estate, it is important to go through the appropriate checklist on the property for legal and financial reasons.



Due Diligence Checklist

Acquisition Actions

  • Signed Letter of Intent

  • Investment committee presentation and approval

  • Select legal counsel

  • Review of the Purchase Contract

  • Access agreement

  • Client Authorization Letter

  • Portfolio Manager Authorization Letter

Title/Survey/Zoning Matters

  • Choose a title Company and review all underlying documents

  • Order current title

  • UCC and judgment lien searches

  • Order new ALTA survey

  • Parcel maps

  • Verify leases, entitlements, and other assignment documents

Tenant/Lease Matters

  • Obtain current Certified Rent Roll

  • Receive/ review leases and all related documents with attorney

  • Review cost pools and expenses pass-throughs

  • Review sales reports, aged receivables, and security deposits

Financial Matters

  • Review historical and pro forma financial information

  • Review utility bills and tax statements

  • Review expenses and budget report

Service Contracts

  • Review service contracts and verify they are terminable without a fee

  • Approve contracts that will be transferred


  • Review litigation list


  • Obtain insurance quotes

  • Provide risk management information and certificate of insurance

Property Inspection

  • Review all property plans and inspection reports

  • Order engineering report

  • Verify parking

  • Review building permits and licenses

  • Review energy consumption

  • Review warranties

  • Site plans, maps, photographs, and leasing brochures

Governmental Review

  • Review licenses and permits

  • Proper zoning letters

  • No pending administrative proceedings or governmental plans

Closing and Miscellaneous

  • Notify seller of anything that is misrepresented during the due diligence review

  • Estimate repair costs

  • Initiate all changes in closing documents

  • Confirm all prorations for taxes, utilities, rents, permits, license fees, utilities, operating accounts, security deposits, closing costs, commissions, tenant improvements, and other expenses.

  • Title costs

  • Schedule of estimated closing costs

  • Tenant Notices

  • Purchase contract

  • Review closing statement

  • Disbursement of funds

Property Operations and Management

  • Choose property management company

  • Finalize property agreements

  • Select leasing company

  • Review warranties


There are several additional elements of due diligence. Your commercial lender can provide additional information related to due diligence and which items pertain to your property.