Preliminary Due Diligence: Why Do I Need It and How To Do It!

Knowing how to properly complete both preliminary and formal due diligence is an absolute must for a note investor. Your success in the workout and return of the note investment relies on how thorough this is completed before the acquisition of the note. For new note investors, this is a tedious and somewhat intimidating process as there is a great deal of research to conduct on each note. This post will outline the preliminary due diligence process and show you the steps we use in our Virtual Assistant Training Program NoteInvestingClub.com.

Stages of Preliminary Due Diligence

This is the "informal" stage of due diligence if you will. This research is conducted before submitting bids on properties and is intended to give you the property information, value, and potential costs associated with the note. This stage is extremely important because it allows you to make an educated bid on a note or pool of notes to ensure your position is not jeopardized and you are leaving enough room for profit in your offer.

What to look for in this stage...

Property Information: This includes number of bedrooms, bathrooms, building type, year built, sqft., and any additional features of the home such as pool, garage, fireplace etc.

Property Condition: In the preliminary due diligence phase this typically means Google Images. 

Neighborhood Demographics/Condition/Crime: I like to use Trulia.com to asses the crime, although there are many other websites out there such as crimereports.com. 

Property Value (CMV): I like to use comparable properties for a value of my home, not just the estimated values some websites provide like zillow.com, trulia.com eppraisal.com, or realtor.com. 

Unpaid Taxes: Locate the tax assessors or tax collectors website for the county the property is located in and determine if there are any unpaid taxes on the property. 

Liens/Judgements: Some counties do not offer their public records for free or online, which means you cannot complete this process without 

pulling a formal lien search. 

From there, derive your price for your bid and send in your offer with your fingers crossed you'll get a yes!

As always, let me know how you liked the post or leave me any comments/questions you may have regarding the topic of preliminary due diligence!