Due Diligence

[Brad81]

Hi guys
complete newbie here. Due diligence, I understand it to be in basic terms, making sure you dot your I's and cross your t's. But can anyone explain to me what the I's and t's actually are?? Does anyone use a dd checklist as such?

 

[Big Will]

Depends what you look for lol, like asking how long is a piece of string.

DD could be looking at comparable sales, building and pest, checking out what the rental returns would be, soil tests, how close the property is to schools/shops/transport.

Really anything!

 

[bobby85]

Wiki says:

"Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations."

I think of it as risk management.
You want to take out as much guess work as possible to make your property purchase a sound investment rather than a gamble (a leap of faith, a punt, etc).

Some things will include:
1. Price. Making sure you know the average selling price in the area of interest so that you don't over pay.
2. Understanding the market: what sort of tenants you'll have, vacancy rates, property managers, PM rates, zoning, local transport, infrastructure.
3. Getting your finances in order.

Essentially if anyone on SS tells someone that they need to have done their own due diligence I think it means: Do some basic research yourself rather than expecting to be spoonfed.