The Importance of Due Diligence
Due diligence should never be thought of as just another obstacle to overcome when getting to the closing table. Too often, it is handled as an afterthought, just something that has to be done because it is expected.
The negative effects from the failure to properly perform adequate due diligence when purchasing investment real estate can never be
overcome. When analyzing a property for
acquisition, assumptions are made regarding physical condition, costs of
renovation or repairs, neighborhood economics, etc., among other determining
factors. Due diligence is the only
chance that an investor has to test the reality and reasonableness of these
assumptions. Additionally, poorly
designed, executed, or budgeted construction projects or operational issues can
turn a potentially superior investment into a black-hole where anticipated
profits sink out of sight.
Frequently, the preliminary negotiations and analyses can take months and the purchaser has invested so much time and effort into putting the deal together, he or she can lose perspective as to whether the property is in the physical or economic condition upon which the entire acquisition is predicated.
Additionally, once a property has been purchased,
construction issues can arise, renovations must take place, and ongoing
operational problems must be addressed. These vital tasks can be overwhelming to new or smaller Investors, or
difficult to coordinate long distances from a company headquarters. That's where we at Sid Malkin and Associates come in.