How to Do Due Diligence on Investment Properties

[David Ounanian]

Ensuring that you do your homework before purchasing a property is extremely important for making an intelligent investment. Here's an easy guide:

1. Check the location - is it in a desirable area? Are there vacant or boarded up homes on the street? Is it relatively safe from crime? Check spotcrime.com

2. Check your numbers - what is the market value of the property using comparable sales? what will the property rent for? An experienced real estate agent can help you determine this information.

3. At this point, a good real estate agent can negotiate the selling terms of the property and get a contract in place. Standard contract contingencies may include an inspection period, financing contingency and appraisal contingency.

4. If the property is rented, examine the current lease documents, rent roll and rental payment history over the last 12 months. Ensure the tenant is in good standing and is not behind on payments.

5. Inspect the property - ensure the property condition is in line with the purchase price. Use an inspector to perform a building inspection that checks all of the components of the home including the electric, plumbing, foundation, windows, roof, hvac, water heater and other appliances.

6. If obtaining financing on the property the lender may require an appraisal - make sure the home appraises for the purchase price or higher.

7. Get a home insurance quote to make sure the property is insurable.

8. Perform a final walkthrough of the property prior to closing to ensure the condition of the property hasn't changed since it was inspected.

9. Close on the property with confidence.


Thanks,