HELP! ..what IS Due Dilligence?
Hi there, from newbie land!..
I'm looking at buying a duplex and because I'm not able to do it myself - low credit score and little cash - I am going to work with an investor. I'm told of several people willing to do this by my investment councelor, but only once "due dilligence" is done. What is due dilligence, specifically? It sounds that hundreds out of my pocket...
Due diligence is investigation of relevant issues. What you investigate depends on the property and the situation. DD can include things like title, zoning, comparable sales, income and expenses.
durhammagnate,
Welcome to REI. Due diligence is another word for 'doing your homework'. As it relates to other investors, it will mark you as either being completent or otherwise.
Due diligence will vary from property type to property type. It will include such things as doing title searches to find out how many liends are against a property if any. How may notes are against the property - what is their position and what is their amount.
Are all property taxes current for the property? Is it propely zoned for the intended use?
What kind of shape is the building in? Is the roof in decent shape, do you have foundation problems. These are all things a good general contractor friend could tell you if this is not your background.
These are just some of thing that might be involved. I've asked before if there was a simple checklist for due diligence, but it seems that because of the variety of deals/properties, that there is no checklist that is all encompassing.
hth,
Robert
[addsig]
Durham,
There are plenty of answers to your question and I am sure different views, my favorite is:
"Most legal definitions of due diligence say something like "due diligence is a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances; not measured by any absolute standard but depends on the relative facts of the special case.
" In other words, to a potential acquirer, due diligence means "making sure you get what you think you are paying for."
John $Cash$ Locke
[addsig]
Thank you folks for replying on this topic. And now I know that, for this property, I have already done my due dilligence.