Investing in real estate is a significant decision that requires meaningful financial consideration. Before finalizing an investment in a specific real estate property, it is imperative that you take the proper precautions to ensure your decision is informed and your financial contributions are protected.
Failing to perform your due diligence could inadvertently cause you to invest in a real estate property with numerous environmental concerns that could put your financial investment at risk. Be sure to avoid rushing through the process to make sure you uncover any potential issues and protect yourself to the fullest extent possible.
How can you uncover environmental problems?
Unidentified environmental issues can cause catastrophic problems for real estate capitalists. Before you begin the process of purchasing real estate it may be wise to conduct certain tests to minimize your financial risk.
The first action you should take is to review the property’s history. Researching the history of the property you intend to invest in can uncover past environmental problems and whether or not an environmental consultant has conducted previous assessments on the land or building. Additionally, you can inquire about any previous environmental concerns with the property’s current owner.
Following your review of the property’s history, you should consider performing a Phase I or Phase II environmental site assessment. A Phase I environmental site assessment involves a visual inspection of the property and a review of reports supplied by government agencies. A Phase II environmental site assessment involves tests of soil and groundwater samples to identify if any issues are present. Performing each of these steps can put you in the best position to shield yourself and your financial investment.
What if environmental issues are found?
If any environmental hazards are discovered during an assessment, the next step should be determining the severity and risks associated with the issues. Depending on how serious the problems are you may be able to simply clean up the site to remove any contamination. If there was minor damage caused to the site, repairing or fixing the issue may also be possible. Prior to exercising either of these options, be sure to consider applying for environmental impairment liability insurance or pollution liability insurance. These insurance policies can protect you from the financial impact of cleaning the property or repairing any damage directly related to the environmental hazard.
If moving forward with the purchase of the real estate property is still financially beneficial, be sure to amend the contract to include indemnification agreements, warranties and other provisions to reduce your risk or to place the liability on the seller.
Financial investments require immense research and due diligence. Real estate capitalists who decide to forgo the necessary steps to shield themselves may end up making an investment that they regret at a later date. Before you begin the investment process, make sure you take the time to search for potential hazards and identify the appropriate means of resolving them. Working with a local real estate attorney can provide investors with a sense of confidence knowing that they have a professional to lean on when issues arise.