Due diligence is the process of double checking everything before finalizing a purchase.  Proper due diligence is an absolutely crucial part of every profitable investor's success.  In this article, I'll talk about the best ways to do your due diligence based on my experience in [Profile.market2] real estate.  This is especially true when purchasing a foreclosure / bank owned or REO property.


Due diligence should start with the proper verification of the books.  You should check all the rental agreements and double check all rental histories.  Review at least the last two year's financial statements and see if there's anything unusual that raises a red flag.  Double check the actual rental income with the amount of rental income the building should be receiving based on the lease agreements.  These numbers will often not match up.  As the building's future owner, you should know why.

Most businesses will not just show their books to anybody.  You have to be really interested and be willing to sign a non-disclosure agreement which any good business SHOULD DO.

Check all the utility bills.  Make sure there are receipts for every payment and there are not any anomolies.  If there aren't receipts, contact the city or the utility company to get a copy of the receipt.

Research the building inself and find out how old the building is.  If it's more than 20 years old, look into what the building codes were when the structure was constructed.  Will there be costly renovations you'll have to make to bring the property into compliance with current building codes?  This might be a deal breaker right there.

If the building is new or relatively new, does it have a home owner's warranty?  Look carefully over this contract so you know what it covers. Walk around the building and do a hands on inspection.  Check the conditions of the walls and floors and especially be on the lookout for signs of fire or water damage.  Thoroughly check the electrical and plumbing systems.  Use a professional if possible as this could be a money pit.  Find out when the roof was installed or repaired and determine how many layers of roofing there are.  More than 2 layers and you'll need to scrape off both layers and start from scratch thus costing more money.  Make an educated guess as to how long the roof will last before it needs repairs.

Remember that everything you find during the due diligence process is "ammunition" you can use to negotiate a better deal with the seller.  The seller wants to make the deal happen as much as you do,  but there's no reason for you to pay more than the property is really worth based on its current condition.

Begin your due diligence process as early as possible.  Start your inspections before you make an offer.  Even after you've made an offer, make sure that you have clauses in the contract that allow you to inspect the property and the necessary documents without penalty during the inspection period.

There is a lot of free information available to you about buying, selling or investing in [Profile.market2] real estate.  For complete information about the Cape Coral Real Estate market including current homes for sale, property values and more please visit the most complete websites online dedicated to everything [Profile.market2] real estate at www.livingincapecoralnow.com and www.dancraddock.com .  Please feel free to contact me with any of your real estate or mortgage related questions and I will be happy to answer your questions.  Call me on my cell at [Profile.cell_phone] or email me at [Profile.email_link].

Have a Prosperous Day and make sure you visit my BLOG.