What is 'due diligence'?
Brett Alegre-WoodChairman, YPC Group
Hey guys,
I was asked the question the other day by one of my newest portfolio clients about what was meant by the term 'due diligence'.
He knew in general terms but he really wanted to know specifically what it meant. Now my immediate thoughts were to put on my salesperson hat and tell him it was all the research we do to prove an investment is worthwhile but I soon realised that due diligence in the eyes of most property clubs was purely a sales term and in a lot of cases what constituted a good deal was how big the discount they received.
Little thought was given to things like actual market rent, potential for growth, possible void periods, type of tenant or possible resales.
You need to stay educated...
Grab my FREE weekly property mastery e-newsletter and learn the very same information many have paid thousands to learn. It's valued at £199 per year and each week, I'll teach you everything I've learned while building the portfolios of thousands of my clients over the last 15 years. Learn from my experience and avoid making the mistakes I did!
You'll learn all this and more in just the first 3 weeks of this newsletter:
 Plus, a special bonus: you'll receive Brett's regular video updates, delivered straight into your inbox, where he turns on his video camera and decodes the week's property news for you!
|
Join our newsletter list for FREE today and you'll receive as a bonus a complimentary copy of Brett Alegre-Wood's best-selling book The 3+1 Plan!
You'll learn the safest time-proven strategies that will guide you and grow your portfolio during any economic boom, bust, recession or downturn.The 3+1 Plan is a step-by-step guide that will show you how, with just four properties, you will be able to fund the lifestyle you have always wanted. Even before you retire! Immediately you register for our newsletter we'll send you the PDF download link for this award-winning book so you can start reading right away...
| ||||||||||||
| |||||||||||||
So this begs the question, what is due diligence? The most important thing to understand is that some aspects of it are always the same and others are very different with each opportunity. To be honest this thing called diligence is a massive part of property.
If we take our two rules for buying property which are buying below value and buy something tenantable we will always make money in property but letâ??s consider how we might make certain or at least enhance our chances of a return.
I break my due diligence into 4 areas; macroeconomic, microeconomic, development specific then the final relates to portfolio specific. It's the last one that l have found to be quite unique but let's look at each it turn.
Macroeconomic - these are things on a big scale. Airports, roads, regeneration, government incentives, major industry investment, market forces or the property cycle, and supply & demand at a national level.
Microeconomic - these are things on a more local level. Schools, transport, shops, community facilities, local government, surrounding environment, local neighbourhood, tenant demand and resale potential.
Development Specific - this includes build specification, size, design, includes such as parking, flooring, chattels, the builder, workmanship or previous workmanship, location, selling points
Portfolio Specific - this is specifically how the investment relates to an individuals portfolio. In other words how does all of the above relate to your overall portfolio. Some might say that this is sales rather than diligence but l include it here to demonstrate that it is important to linked your portfolio with the individual plot and property.
Due diligence for me is not a separate thing you do as a one size fits all. it's a personalised process to each investor. Sure in the initial stages you are not personalising it but as the process progresses it must take into account the individual needs of each investor. To truly achieve this you need to have an understanding of each persons portfolio and circumstances rather than just flog them property because you need to sell.
Ask your PC for a copy of my simplified checklist for conducting due diligence.
Live with passion,
Brett Wood
Reader comments for the article 'What is 'due diligence'?'
You're invited to join in the discussion of this article. Do you have advice to share? An opinion or some feedback that adds to the discussion? Feel free to add it below! (Please note though that ALL comments are checked before they're posted.)
Brett reporting from Malaysia, should we open up an office in Malaysia?
How will the Euro affect you as an investor?
Is it realistic to have cashflow positive investment property 100% of the time?
How Much Capital Do You Need To Get Started In Property Investment?
How Quickly Should An Investor Build Their Property Portfolio?
Brett reveals London's newest, still-unknown hotspots in new video