Buy With Confidence

Commercial Real Estate Due Diligence Checklist

Everything a Flagstaff or Northern Arizona buyer should verify before closing: financials, leases, physical condition, zoning, environmental, title, and financing. Mike Konefal, Broker Associate at Coldwell Banker Northland, runs this checklist on every transaction.

928-853-3810 · mike@flagstaffrealestate.com · License SA690466000

Why It Matters

Due Diligence Answers the Four Fears Behind Every Search

People search for commercial due diligence because they are afraid of four things: Can I afford this? Can I actually use this property for my business? Is this a good investment? And am I about to sign something stupid? A disciplined checklist answers all four before you commit money. In a commercial deal, surprises found after closing are expensive, and surprises found during due diligence are negotiable.

"Can I afford this?"

Financials, financing, and the full cost of ownership, verified in writing.

"Can I use this for my business?"

Zoning, entitlements, access, and physical condition checked against your use.

"Is this a good investment?"

Leases, income, expenses, and market evidence supporting the value.

"Am I about to sign something stupid?"

Title, environmental, and contract review so the risk is priced before closing.

The Checklist

The Full Commercial Due Diligence Checklist

Work through these categories in order, and keep every document, report, and email. Mike manages this process on every Flagstaff and Northern Arizona transaction.

1. Financials and NOI

  • Three years of income statements and the trailing 12 months, if available
  • Rent roll with unit-by-unit rent, terms, deposits, and concessions
  • Operating expense history: taxes, insurance, utilities, management, maintenance
  • Actual expenses versus pro forma: find where the seller’s numbers are optimistic
  • Capital expenditure history and projected capital needs over the hold

2. Lease quality and tenant risk

  • Read every lease: rent, escalations, term, renewal options, and options to expand or terminate
  • Confirm security deposits, letters of credit, and guarantees are held and assignable
  • Check who pays expenses: gross, NNN, or modified structure, and the caps
  • Confirm tenant insurance requirements and certificates are current
  • Evaluate tenant credit and the concentration of your income in any single tenant

3. Physical inspection

  • Professional building inspection of roof, structure, HVAC, electrical, plumbing, and fire systems
  • Parking lot, paving, drainage, sidewalks, and exterior condition
  • Age and condition of major systems, and the repair history from the seller
  • ADA compliance review and the cost of any required accessibility work
  • Confirm square footage and the rentable-versus-usable math on every space

4. Zoning and entitlements

  • Confirm the current zoning and that your intended use is permitted
  • Check for conditional permits, nonconforming uses, and special approvals
  • Verify lot, building, and parking compliance with zoning and building codes
  • For land: confirm utilities, access, entitlements, and the approval path in writing
  • Review the county or city comprehensive plan for changes coming to the area

5. Environmental

  • Phase I Environmental Site Assessment, and a Phase II if the Phase I flags a concern
  • Check for underground storage tanks, past uses, and neighboring contamination risk
  • Asbestos, lead, mold, and other materials that carry remediation cost
  • Confirm the property is not on or adjacent to an EPA or state cleanup site

6. Title, survey, and legal

  • Order the title commitment and read every exception, lien, and encumbrance
  • ALTA survey to confirm boundaries, improvements, easements, and encroachments
  • Check covenants, conditions, and restrictions (CC&Rs) and homeowners or commercial association rules
  • Verify property taxes: current year paid, prorations, and any special assessments
  • Have an attorney review the purchase contract and closing documents

7. Parking, access, and operations

  • Confirm the parking ratio meets your use and the zoning requirement
  • Check truck access, turning radius, and delivery logistics for industrial uses
  • Verify ingress, egress, cross-easements, and shared maintenance agreements
  • Confirm utilities, water, sewer, power, and internet actually serve the space

8. Financing and closing

  • Secure financing commitment and confirm the lender’s inspection and appraisal requirements
  • Model the deal across your price, rent, and vacancy assumptions before the offer
  • Confirm prorations, closing costs, transfer taxes, and the 1031 timeline if applicable
  • Verify the entity that will hold title and the tax implications of the purchase

Run the analysis along with the checklist

Model cap rate, cash-on-cash, DSCR, and a 5-year projection while you verify the documents, so the numbers and the paperwork tell the same story before you commit.

Use the Investment Property Analyzer

Four Ways to Work With Mike

Find, Buy, Sell, or Invest in Northern Arizona Commercial Property

Whatever your commercial goal, start with the door that fits. Each path links to the detailed guides for that part of the market.

Sell or Lease Your Property

Price it right, market it well, and manage the process through closing.

Explore Sell or Lease Your Property

Invest in Northern Arizona

Analyze income property, cap rates, and long-term hold strategies.

Explore Invest in Northern Arizona

Have a commercial real estate question?

Buying, leasing, land and development, investing, or selling: read the direct answers first in the Flagstaff commercial FAQ, then ask Mike about your specific situation.

Browse the Commercial FAQ

Due Diligence FAQ

Due Diligence Questions, Answered

Timelines, environmental risk, title, surveys, and what happens when the inspections find something.

How long does commercial due diligence take?

A practical due diligence period on a commercial purchase is commonly 30 to 60 days, depending on the property and the inspections required. Land, buildings with tenants, and special-use property each move at their own pace. Mike structures the contract timeline so the inspections, financial review, zoning check, and financing all fit inside the contingency period.

What happens if due diligence finds a problem?

It depends on the contract. Depending on how the contingencies are written, you may be able to negotiate a credit, require the seller to fix the issue, reprice the offer, or walk away with your earnest money. That is exactly why due diligence happens before closing, and why the contingency language matters as much as the inspection itself.

Do I need an environmental assessment on every commercial property?

Not every property needs the same level of environmental review, but the risk is real and the cleanup costs can dwarf the purchase price. A Phase I Environmental Site Assessment identifies recognized environmental conditions, and if it flags a concern, a Phase II with testing follows. Lenders often require at least a Phase I on commercial transactions.

What is title insurance for commercial property?

Title insurance protects you against claims or defects in the title that you did not know about at closing, such as liens, encroachments, easements, or ownership disputes. The title company searches the public record and issues a policy, and the commitment lists the exceptions. Reviewing the title commitment early is standard practice in a commercial purchase.

Should I get a survey?

Yes, for most commercial purchases. An ALTA survey maps the property boundaries, improvements, easements, and encroachments, and it is often required by the lender and title company. Survey problems, like a building sitting over the line or an unrecorded easement, are far cheaper to find before closing than after.

Can you help me with due diligence even if I am not buying?

Yes. The same checklist applies when you are leasing space, refinancing, or doing your own analysis of an investment opportunity. Mike regularly reviews leases, financials, and property condition for clients across Flagstaff and Northern Arizona, whether they are buying, leasing, or underwriting on their own.

Don't Do It Alone

Have Mike Manage Your Due Diligence

Mike coordinates the inspections, financial review, zoning checks, and title work on every purchase, so the checklist actually gets completed inside the contingency period, and the findings get negotiated, not ignored.

Phone 928-853-3810 Email mike@flagstaffrealestate.com
Coldwell Banker Northland Realty
123 W Birch Ste 105, Flagstaff, AZ 86001

What happens next

  • A direct conversation

    Mike replies quickly with straight answers, not scripts.

  • Real market analysis

    Comps, income analysis, cap rates, and deal structure shaped to your goals.

  • Confidential by default

    Off-market opportunities stay off-market until you say otherwise.

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