Do your due diligence when investing in real estate. You’ve heard that before, but what is due diligence? A simple definition: “The investigation and verification of the details of a particular investment.” Start the process before the offer, but in the offer you also will want to include clauses that allow you to have inspections done, look at certain documents, and review the books.
Due diligence should always include a look at the books. Review the last 24 month’s income and expense statements, and watch for anything unusual, like expenses that are too low or income that seems higher than usual. Look at the rent roll, and investigate whether rents are over or under the market rates for the area you are in. Check the payroll records if there are employees, and watch for surprises, like accrued vacation time that you’ll have to pay as the new owner. Continue reading Due Diligence For Real Estate Investors