IN THIS POST
- Collect the Basic Information
- Conduct Building Inspection
- Assess Tenant Information
- Review Statements & Agreements
- Check Property Documents
When buying or renting commercial property, there are many factors to consider. However, even seasoned investors frequently make mistakes that might lead to a catastrophe because analyzing a possible investment can be fairly intimidating. Follow our checklist for buying a commercial property in Pakistan to discover what inquiries to make and which documents to demand if you want to avoid making such expensive mistakes.
Plots, stores, offices, and warehouses are the primary categories of commercial real estate in Pakistan. If you’re still torn between investing in residential or commercial properties, be sure to read our in-depth information on the subject. Before we talk about the commercial real estate due diligence checklist, you may take a look at the most crucial aspects of commercial investment in Pakistan.
CHECKLIST FOR BUYING A COMMERCIAL PROPERTY
Here is a list of things to watch out for when purchasing commercial real estate.
Collecting Basic Property Information
Gathering the fundamental information regarding the property you’re interested in is the first step on our commercial real estate due diligence checklist. This involves learning about the building’s area, the number of floors, the types of available properties, the total number of commercial units, the size of the parking area, the zoning, the availability of public amenities, and, most importantly, the NOC issued by the relevant development authority.
After gathering the aforementioned information, you should cross-reference the data provided by the seller or real estate agent with the public records for additional confirmation. To find out the current situation of commercial real estate in Lahore, for instance, you may get in touch with the Lahore Development Authority (LDA). Buyers in Islamabad should get in touch with the Capital Development Authority, while those investing in Karachi can speak with the Sindh Building Control Authority (SBCA) or Karachi Development Authority (KDA) (CDA).
Conducting Building Inspections
The second item on the checklist for purchasing commercial property is to examine the utilities, facilities, and structure of a building.
A business venture is typically more expensive than purchasing a home or apartment, thus it is advised to use qualified inspectors and experts to evaluate each section of its structure separately. The foundation, roof, walls, condition of windows and doors, electrical system, water supply, waste management system, gas connection, phone lines, emergency exits, underground storage tanks, central air conditioning system, security systems, and other facilities are all inspected as part of this process. To check for mold, termites, or other infestations, you need also to engage professionals.
Whether you are a first-time investor or have a lot of business expertise, be careful to work with professionals that are familiar with the regional construction codes. You must consider the housing society’s bylaws when inspecting the building if the property is inside of one.
Assessing Tenant Information
There are advantages and disadvantages to purchasing a building that is currently inhabited by many firms.
The good news is that you may simply renew the existing leases with the current tenants without having to advertise or find new ones. On the other hand, in order to guarantee consistent rental revenue, you will undoubtedly need to make adjustments or perhaps terminate certain contracts. Therefore, learning more about the current renters makes up the third step on our checklist for purchasing commercial real estate.
Obtain as much information as you can on the tenants before you sign anything. You should be informed of the kind of firms that are housed in your prospective commercial venture. Verification is also required for the monthly rent, security deposits, and utility responsibilities.
To make sure that each renter will be able to make their payments on time and avoid defaulting, it is also crucial to look into their financial health. You might be able to get a good idea of these businesses’ ability to pay the rent by looking at their business models.
Additionally, because business leases are often for a number of years, you should look into any active liens and lawsuits that each renter may have. As such renters might have a bad effect on the reputation of your home, ask the seller about their contract specifics if you come across a company with a history of legal or financial difficulties. They might impact your rental yield as well.
Reviewing Statements And Agreements
The business property you intend to purchase may have had a physical inspection, but what about looking over its non-physical features?
You must examine building permits, architectural drawings, authorized plans, zoning paperwork, environmental assessments, financial records, and building code infractions before purchasing commercial real estate. Additionally, you should ask for details regarding any ongoing and previous legal disputes. You then need to obtain and examine several service contracts. Along with having them verified, you should also see whether you can cancel them without incurring any fees.
Checking Property Documents
Getting and checking the papers is the last thing on our to-do list for buying commercial property.
To clear up, any questions you might have regarding the procedure, read our guide to selling and transferring property in Pakistan before we explore the list of documents you must get before making the sale. Our real estate dictionary will also be very helpful if you are new to the real estate sector.
- Sale Deed
- Mother Deed
- Approved Plan of the Property
- Bank Approval Certificate
- Encumbrance Certificate
- Power of Attorney
- Property Tax Receipts
- Completion Certificate
No matter how unimportant a detail may seem, you should always take additional precautions to make sure you don’t overlook it while purchasing or leasing commercial real estate. A few thousand rupees spent upfront on due diligence is a far better investment than losing several hundred thousand later on. Additionally, employing specialists for building inspection may be a little pricey.
