When you say the term “due diligence” to most investors they will naturally think about the basic checks anyone undertakes before buying a property. In fact, most investors will probably think of due diligence as being something they do after they have agreed terms to buy a property – having a valuation and survey, appointing a solicitor to undertake searches or to check the HIPS pack. Of course, for visitors to The Property Teacher it would also include all pre-action activity including checking the pre-auction legal pack and arranging finance and survey.
It’s true that those things are part of doing one’s due diligence but I think for a successful investor due diligence goes deeper than this.
And I would suggest that the most valuable due diligence you can do is before you make an offer.
By now, if you have read any of my other articles or books, you won’t be surprised if I say that I think the starting point is to check the property, and the consequences of owning the property, against your strategy.
For me the starting point of due diligence isn’t to find out if the legal title is ok, important though that is, but it is to ask three questions:
- Why am I buying this type of property?
- Why am I thinking of buying this particular property?
- Will this property fit my goals and strategy?If your property makes it through this first basic test, there are then a series of questions which I think you need to ask yourself. And these questions will be phrased in line with your overall property and investment strategy. We’ll look at these in the next post.Peter Jones B.Sc FRICSwww.ThePropertyTeacher.co.uk
- Chartered Surveyor, Author & Property Investor
- Here’s to successful property investing.
- Space and time do not allow me to repeat here my views on the importance of knowing your overall property strategy. But suffice to say that if you cannot answer the first two questions, or if the answer to question three is “no”, then you know you have problems and probably need to clarify what you are doing and why, or to pull out of this deal, or both.