Due Diligence in Real Estate: Two Steps You Should Never Mess Up

One bad deal can cost you several good ones in the future, which is why it is best to get them right each time. To ensure this, you need to carry out due diligence properly to avoid a deal going wrong for you.

Forming a Process
There is a need for a process creation that will guide you on the necessary steps to take, and a standard checklist looks like this:

• Pre-Offer Examination: This includes analyzing the area, estimating its value, and a rehabilitation estimate.
• Post-Acceptance Due Diligence: This includes a deeper physical examination, financial analysis, legal procedures, and inspections.
• Re-trading: This is asking for a discount if necessary.
• Making the Final Decision: This is where you decide to pull the trigger or walk away.

The most important thing on this list is the second item, Post-Acceptance Due Diligence, because the first happens before an offer, and the third and fourth completely depend on the second.
If the house is rented out, then you need to get a copy of the lease, proof of deposit, rent ledger, and operating statement for the last year.

Physical Due Diligence
It doesn’t matter if you have walked the property before making an offer, you need to do it again and more thoroughly this time to get all the details. Check the utilities to see if they work or not and if you need to make adjustments to your rehab budget.

Inspections
It is recommended that new investors hire a third-party inspector. This can help with a re-trade too (if necessary) as it lends credibility to your request. Inspections can also show defects that you may have missed on your personal inspection. If you’re an experienced investor and have done a detailed walkthrough yourself, then you could consider foregoing a third-party inspection. But I would add a contingency to your budget for things you might have missed during the walk-through.

Conclusion
Bad deals can kill your momentum. Luckily, they can mostly be avoided by carrying out proper due diligence. So do it!

Previous Episodes
- How to Manage Collections and Delinquency
- How to Find Banks for Your Investment Properties
​- A Crash Course on Building a Buy and Hold Real Estate Business
- Is the Economy on the Edge of a Cliff??? How Should Real Estate Investors Respond?
- An Introduction Into Buying Portfolios
​-Why Buy and Hold is So Powerful
- In-House or Outhouse Management
- Doing Maintenance Right
​- Moving to California?
-What to Do When a Tenant Calls at 2:00 AM | A Guide to Emergency Maintenance



And don't forget to subscribe to our Youtube channel!