The dictionary defines due diligence as “research and analysis of a company or organization done in preparation for a business transaction. You’ve looked at the numbers, like what you saw and made an offer. Now is the time to carefully examine all the information you were told to ensure that it is all correct. But, due diligence is more than examining what you have been told, it is digging as deep as you can to fully understand what the potential risks and rewards of this business transaction are.
You should do a physical inspection of the property condition in person. I know, you're thinking, well I am hiring an engineer, or property inspector to tell me what I need to know. Sometimes what you see in person can be even more revealing than what a report from a professional is going to tell you. Like, unseen potential that you will only understand if you physically examine the property and neighborhood yourself.
Of course you need the property inspector, or engineers report to tell you if any big-ticket items are lurking around the corner. Will the property need a new central HVAC system installed in the near future, are there foundation problems, is the electrical and plumbing on their last leg, or does the parking lot need resurfacing, just to name a few.
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Now you know what the building is really like inside and out after your own inspection and that of a professional. With that part of due diligence out of the way it’s time to examine all the documentation. There should be a thorough review of all lease agreements, the rent rolls, income statements, balance sheet, maintenance contracts, utility records, tenant deposits and any pending litigation.
So now that you have done all that, do you think you’re done? Well, not if you’re a careful investor. At this point you should do a market analysis, and a competitor analysis to see what others in the area are charging for rents. You should know what amenities are included and any incentives that being offered. You will also want to carefully examine the neighborhood to see how stable it is. You should talk to some of the people who live in the area. Is the neighborhood in a decline, or is it going through a major revitalization. Has there been an increase, or decrease in crime?
For your convenience you can fill out our search request form. We will notify you by email when we find properties that we think you might be interested in. Of course we’re more than happy to speak to you if you prefer to give us a call at 916-747-0390, or can just shoot us an email. |
