As mentioned last week, I'm currently under contract on an Industrial / Industrial Outdoor Storage (IOS) property about 20 miles from Boston, MA. I've kicked off my due diligence process, and I figured it would be helpful to shed light on the costs and process in general.
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​PS: If you want to see my real estate deals, quarterly updates, and new CRE opportunities, join my RE Investor List. ​
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When buying CRE, you cannot cheap out or do half-assed due diligence. To successfully execute a deal, you must be willing to invest 1-2% of the deal cost, known as "pursuit costs, " into the process. If you decide not to move forward, that money is gone.
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If you close the deal, you'll be reimbursed and charge the deal a 1-1.5% acquisition fee for all the work. Deal hunting isn't for the faint of heart; it's expensive, grueling, and tedious.

Here's what I include in my DD:

Note that some deals require more (or less), so consult your attorney.
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​Due Diligence Checklist:
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​1. Hire an attorney with real estate experience
2. The attorney can assist with title work, zoning, and entity formation (GP/LP)
3. Schedule Phase I (maybe Phase II) environmental study
4. Schedule property condition report
5. Current leases, tax information, utilities, service contracts, rent collection, etc.
6. Request surveys, architectural drawings, inspections, warranties, insurance, etc.
7. Hire a tax consultant to understand reassessment implications (also call assessor)
8. Hire zoning experts to confirm allowable uses
9. Supply/demand analysis, market studies, new supply, lease comps, etc.
10. Discuss current tenants and non-conforming status with the building inspector
11. Hire a debt broker to shop the deal for the best rates and terms
12. Create a "teaser" for prospective investors (small deck with high-level info)
13. Continually update and pressure test model with new information
14. Create a "Confidential Business Overview" to raise capital from investors
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As you can see, DD quickly becomes expensive (and it's a lot of work). But at the end of the process, you should either be:

1. More convicted in your thesis
2. Ready to walk away

I'm a person who loves (and needs) to know why things need to be done. So, as I go through the process of this deal, I'll share insights and reasoning behind certain parts.
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In the next few weeks, I'll share the "teaser" with my RE Investor Newsletter subscribers and provide other inside information on my deals.