Rookie Reply: What is Due Diligence in Real Estate?
What is due diligence in real estate? If you ask most new investors, they’ll have some sense of what due diligence is, but may be confused about what it really means. Is due diligence when you analyze your deal? Who should you be in contact with during due diligence? How long does a due diligence period usually last? And what happens if your deal turns out to be a dud in due diligence?
In reality, due diligence isn’t all that confusing. It’s simply the time that you, and your partners (if you have them), spend inspecting, double-checking, and re-analyzing the deal. The due diligence period is there for the protection of the investor, so you can use everything in your power to confirm that you truly are getting a great deal. But, before you start calling inspectors, make sure you follow some of these more granular steps that could save you a fortune in the future.
Never done due diligence before? Here are some suggestions:
Work with a seasoned real estate broker, agent, or attorney who can catch things you won't
Double-check that your financing options still stand if you find anything wrong with the property
Talk to the local city government or code enforcer to ensure prior work on the property was done correctly
Calculate out what the cost of repairs will be for the property once you’ve gotten an inspection
Don’t fall in love with a deal and be prepared to walk away if you find something that’ll kill your exit strategies
And more in the episode…
If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).
Links from the Show
Check the full show notes here: https://www.biggerpockets.com/blog/rookie-190