What Items Should You Check During Due Diligence? Part 2

Ironically, one of the most important things that you should do during due diligence is your due diligence on the property, meaning inspections. If you don’t know what you are buying, you might have a few surprises. This is especially important if you are planning on converting a property or adding on to a property. If you don’t have city approval, you may find that your great ideas are just that, ideas. You don’t want to get stuck with a property that you can’t sell.

The first step in determining if a property can or should be a conversion is your feasibility study. You want to give yourself time to have this study done. This isn’t a 10 minute study; it will takes weeks to get your study depending on how busy your company is. They will let you know if your ideas make sense financially and if they will work in the area that you have chosen. If the feasibility study comes back negative, you don’t want to move forward no matter how emotionally involved you are. You need to be able to get out of the contract, so you are not obligated to purchase a property that doesn’t work.

Next, if you are doing a conversion, you need to make sure that planning and zoning is on your side. If they want to see you turn your building into a self-storage facility, it will be much easier to get the project approved. If they absolutely do not want self-storage in that location, you may run into some roadblocks. Always check with planning and zoning to verify if you can put in self-storage before you move forward with the purchase.

There will be a lot of additional studies and inspections that will need to be done based on what you are doing. Again, you need to make sure that you are getting reputable companies to provide your inspections and tests. You want to be able to back out based on negative results.

While there are a lot of reasons that you might want to move forward with a project, you always need to protect yourself and make sure that this is a feasible opportunity. If you run into red flags, it is better to cut your losses now than it is to get sucked into a property that may be an unprofitable investment. As always, happy investing.