"A New York minute lasts only 38 seconds": that was my line to a co-worker last night describing relative speeds between New York City and Princeton, NJ, where we are based. More and more, the time to do things is shrinking. Buyers have less and less time to complete their due diligence; they have to move quicker and quicker before making a decision. So for this week's Friday Five, I present five questions you should ask before purchasing any property.
What is being offered for sale? This sounds obvious, but it isn't. Here's what you need to know:
- The specific dimensions of any construction on the property
- The total size of the land
- If the sale price includes air rights -- can you build up the property and if so, how high can you go
- What else is included in the sale price -- is there well underneath the property that you will be taking responsibility for, or an old septic tank lies underneath a patch of grass
Why is it being offered for sale? Is there some defect in the property? Or has the owner simply out-grown the space? This is important to know.
What is the property worth? This is not the sale price, but it's not the appraisal price either. To get this information, you need to look at what your estimated income from the property would be, and factor that in.
What can the property be used for? What zoning regulations are you about to buy into? If you want to build a hospital on the property, make sure that there are no restrictions preventing hospitals from being established there. Make sure you double-check that your business plan can succeed at this location and that there are no zoning restrictions preventing you from setting up shop.
When will it be available for use? How much work is needed? Are you paying for a building that you can't occupy for 6 months? Then that is 6 months where the building is not making you any money. Why won't it be available for the time period that you have to wait, and what will it cost you to maintain it before you can move in?
These are all questions that you need to answer, but they aren't the only ones. IncreMental Advantage's Real Estate Due Diligence Conference will spend two days going over every aspect, and help you make sure you are doing everything you can to make sure you get the best deal possible.
Have a great weekend.
-Posted by Justin
To find out more on IncreMental Advantage's Commercial Real Estate Due Diligence Conferences on January 22-23, 2007 (Newport Beach, CA) and May 7-8, 2007 (Chicago, IL), visit www.incrementaladvantage.com/conferences or contact Neomi at neomi@incrementaladvantage.com or 609.919.1895 x100.
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