CHAPTER 24 Due Diligence and Inspections
Due diligence is something that you should be doing throughout the entire deal, but it’s most important right before and during the escrow period. It is basically doing your homework on the property you are investing in. It involves checking, double- checking, and triple-checking the property and its documents. After you do your due diligence, you should know if you are doing a good or bad deal or anything in between. It is broken up into three parts: physical, financial, and legal.
PHYSICAL INSPECTIONS
This is the part where you walk around the property and conduct a few deep checks on each of its aspects. I’ve talked about this pretty in-depth throughout the book. This is where you need to hire a neutral third party who is trained to spot things you are not. I think this part of due diligence is by far the most important one. Mistakes on this are usually the most expensive ones you can make. If there are real problems with the property’s structure, it will greatly affect its long-term value. The best way to pick who does your inspection is usually through a referral by your broker. They’ll refer you to a professional and truly neutral party. You really need a professional who has experience with this, and a set of eyes trained for it. You will be looking for aspects of this when you go on tours and look in each room, but you can only notice so much. Sellers don’t 143
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