Planning to purchase a commercial property? Before you sign the closing documents, it’s essential to ensure that you know what you’re getting into! Today’s blog will cover what records you should request when you buy a commercial property.
You want to be sure that the property will perform the way you need it to. Additionally, you’ll need information about the property to negotiate a good deal.
Of course, you will want to get a third-party inspection and a title report. But that information will only get you so far. To help you make an informed purchasing decision and aid with the transition process – you’ll need to request documents that can give you a better picture of the property’s value. Here are the purchase records you’ll want to request if you are serious about acquiring a commercial property.
Helpful Documents to Obtain from Sellers
Operating information for the past 2 to 3 years, including:
- Financial statements
- Operating budget and capital expensed budget
- Employee information, including their wages and benefits
- Real estate tax bills and evidence of payment
- Utility bills
- Aged receivables report
- Insurance policy information
- List of capital expenditures
- Improvements the Seller has agreed to complete that are still in progress
Tenant and leasing information, including:
- Current and past vacancy rates
- Leasing status report
- Standard form lease
- Tenant details (name, contact information, suite number, concessions made to tenants, nature of each tenant’s business and use)
- Rent roll containing each tenant’s rent, scheduled rent increases, common area expense pro-rata share, base year and base year expenses, caps, term commencement and expiration dates, security deposits
- Tenant estoppel certificate
- Certificates of occupancy for each tenant
- Letters of intent from prospects
Reports, plans, permits, and certificates, including:
- HVAC and other mechanical reports
- Environmental reports (mold, lead, asbestos, soil, radon, etc.)
- Roof reports
- Certificate of the square footage
- ADA compliance report
- Title survey and/or boundary survey
- Notices of violations that may relate or apply to the property
- Any verifications of compliance with health, fire, building, zoning, safety, etc.
- Any other licenses, permits, and approvals that apply to the property
While this isn’t necessarily a comprehensive list, it can give you a better idea of purchasing records to request from a seller. Not only will it help you make better decisions throughout the buying process, but it will be helpful to already have all the information on hand as you transition to owning and running the property.
If you can get a good picture of the tenants, finances, and building information over the past two or three years (including year-to-date info), you’ll be in a great position to determine the value of the property.
Selling a Commercial Property? Have Purchase Records On Hand!
If you’re selling a property, you should anticipate that buyers will likely request these documents. In general, it’s a good idea to have all the necessary documents accessible so that you can quickly get them into the buyer’s hands and move the process along. It’s also best practice to get your common area maintenance in order prior to selling.
Use STRATAFOLIO or another easy-to-use system of organizing your data that centralizes all your data in a single hub. That way, it won’t be a chore when it comes time to share tenant information, financial statements, payment records, operating information, and anything else that the buyer might request. If a buyer is ready, you want to have the information available easily.
To learn more about how STRATAFOLIO can help you with document management or lease administration activities, reach out and schedule a demo!