Those considering investing in real estate will need to conduct thorough “due diligence” in order to weigh the rewards against the risks. The pros and cons will always depend on the goals of the one investing.
The location and surrounding environmental are always important factors in determining a real estate property’s revenue possibilities. Neighborhoods with new developments, for example, may be an attraction for consumers looking for the latest and greatest in retail, restaurant and other trends.
Alternately, a location with possible environmental hazards, like soil contamination that requires clean-up, may be an expense a potential investor is not willing to pay for.
According to WealthManagement.com, property owners may find themselves liable for harmful toxins that cause health issues in the event they do take on clean-up costs.
Before purchasing vacant real estate, investors should always review the existing local zoning ordinances, as they may create an obstacle to using the property in the manner the buyer intends.
A vacant office building, for example, may require a zoning change in order to redevelop it into a mixed-use property. If development could attract lucrative commercial tenants, rezoning expenses may prove fruitful.
The due diligence list for commercial real estate investors can be daunting and seemingly unending. Location and zoning are just a couple of considerations. Those truly thinking about these ventures should consider seeking advice from a real estate attorney having the knowledge necessary to help investors with the due diligence process.