ABSTRACT
A property’s current physical condition determines its commercial development potential as well as its ability to generate rent revenue and serve as mortgage collateral. One of the main objectives of the due diligence period is to confirm that the land, buildings, and other improvements to the real estate are in good condition and will serve the investor’s development goals and objectives. Ascertaining the physical condition of the property customarily is accomplished through site inspections and reports from professionals and consultants who give opinions as to the property’s current physical condition. Ideally, the consultants’ reports will also estimate the remaining useful life of the property’s major building components, systems, and equipment. Comprehensive physical inspections confirm current operating expenses for the property, and help project future capital replacement costs over the length of time the property is expected to be held or financed.
