September 4, 2020
Create Your Due Diligence Dream Team
Once you find a site, negotiate the terms of the deal, and wrap up the Purchase and Sale Agreement, that’s when the real fun begins. You get to find out what you’re buying. One of the questions we always recommend asking your real estate agent before you hire them for the property search is if they have a “Due Diligence team” with whom they’ve worked in the past to take care of bids, inspections, permits, and any other type of work that needs to happen to spot any potential issues and wrap up the sale.
Every good real estate agent will have a good team, and every good team should have a primary contact and at least one backup contact, sometimes more, in the event you need alternative bids or other opinions. Here are the types of services and contractors to have in your arsenal:
7 Contractors you need for your dream team
- Real Estate Attorney. If you get nothing else from this video or from any video at The CRE Coach, please get this. Make absolutely certain you have an commercial real estate attorney who has many, specifically commercial, real estate transactions under his or her belt. Too too too too many times residential real estate attorneys who have never reviewed a commercial Purchase and Sale Agreement get stuck on normal points that cost you money but most importantly, they cost valuable deal time. Time kills deals. The worst thing that could happen is an inexperienced attorney gets overwhelmed and either over-negotiates or completely misses basic protections. Even worse, you may have worked with an attorney who has worked on other legal projects but few real estate related at all. You wouldn’t hire an attorney who does estate planning for a commercial real estate deal. This is a disaster and constantly hinders sales and leases for owners, buyers, and tenants alike.
- General Contractor. We recommend working with a couple general contractors depending on scope of the work. If the site needs a complete overhaul or is raw land that should be deforested or designed for a build to suit, you may want to get bids from more than two to make sure that all the quotes make sense and you are working with the right firm.
- Environmental Testing Company. The vast majority of commercial real estate purchases require at least a cursory review of the environmental status of the site, and having 1 or 2 different vendors is usually good enough because the tests are straight forward and the industry is more regulated than for example the roofing business.
- Roofer. Speaking of which, for that reason, we recommend having 2-4 roofers on call because each roofing company has different specializations, and estimates can vary widely. I’ve seen sellers give roof reports from 2 or 3 different vendors to a buyer, but when the buyer took over the building they found out the damage was actually far worse. There are numerous variables that contribute to the cost of a roof, you don’t want to miss any of them
- Paving Contractor. Like roofs, replacing a parking lot can be very expensive, and you will again want 2-4 of these companies because of the widely varying cost structure.
- Plumbing and HVAC Contractor. Plumbing and HVAC service providers often have the ability to do maintenance on both the water and the HVAC building systems. You will want to be sure the systems are in good working order, especially if you have a heavier than normal requirement for these kinds of utilities.
- Electrical Contractor. Electricians will tell you if the building or business park has outages often or will be handle your electrical usage. They will also let you know what upgrades might be necessary. Find a couple electricians who have specific experience with industrial real estate in your area.
You don’t want to be in a mad dash to find contractors when you are in the Due Diligence period with a ticking clock on getting your homework done. Get a list of recommended vendors from your agent and start assembling your real estate dream team right away.
