Introduction
Purchasing a property is a big decision, and it's important that you are fully informed about the potential costs and risks involved in doing so. This is where due diligence comes in. Due diligence is the process of looking into a property before purchasing it to ascertain the costs of any additional work that may need to be carried out. Whilst carrying out your due diligence, it is important to remember that with the increased risk of purchasing a property in need of renovation or repair, comes the increased potential for profit. Due diligence often comes in two phases; a pre-sales phase and then a post-sales phase surrounding survey results and legal work. Lets take a look at what due diligence means:
Due diligence is the process of looking into a property before purchasing it to ascertain the costs of any additional work that may need to be carried out.
Due diligence is a complex process that involves looking into all aspects of your investment, including the cost of any necessary repairs or refurbishments. It’s not just for buying property; due diligence may be required in other areas too. For example, if you are considering taking out a mortgage with a new lender or remortgaging your current home, it’s always advisable to do some research before making any decisions.
Due diligence isn’t just about checking that everything is above board and legal – it also helps you make informed decisions about your investments and avoid unnecessary costs down the line.
Whilst carrying out your due diligence, it is important to remember that with the increased risk of purchasing a property in need of renovation or repair, comes the increased potential for profit.
As you are doing your DD, it is important to remember that with the increased risk of purchasing a property in need of renovation or repair comes the increased potential for profit. With a good DD phase, you will be able to:
Identify areas of work needed on the property before making an offer
Determine how much this might cost and if it is financially viable. It may also help you negotiate your offer price down if there are significant repairs required.
Due diligence often comes in two phases; a pre-sales phase and then a post-sales phase surrounding survey results and legal work.
Due diligence is often done in two phases. First, there's the pre-sales due diligence, which includes:
A review of the property's title and chain of ownership. This will tell you if the seller has any unpaid taxes or liens against the property, and whether any claims have been filed against them. You'll also want to make sure that no one else holds an interest in the property (for example, if someone has a mortgage). If you find issues here, you may have to negotiate with those people before closing on your purchase.
An inspection of the building. This can involve looking at water/sewage systems and plumbing fixtures; as well as inspecting walls for damage from mold or leaks; checking electrical systems; etc.—basically anything that could negatively impact your ability to rent out or move into this home after buying it!
Post-sales due diligence involves:
Taking possession of keys once you've closed on your purchase. Then make sure no harm has come during this time period before handing over those keys (and making sure all vendors were paid).
Your pre-sales due diligence phase can be easily broken down into four key areas: budget, building regulations, planning permission and structural damage.
The pre-sales due diligence phase can be easily broken down into four key areas: budget, building regulations, planning permission and structural damage.
Budget is a key factor in your decision to buy a property overseas. It's important to have an understanding of the costs associated with buying property abroad before you start looking for properties in other countries. These costs can include stamp duty (if applicable), legal fees, registration fees and bank transfer charges. If there are any additional taxes that will affect you as an owner or rentier, make sure you know about them upfront so that you don't get caught out when it comes time to pay them!
Building regulations are important to consider when buying a property, especially if you are buying in another country. They vary from country to country and can include everything from structural integrity and fire safety standards to access for disabled people. You should have an inspection carried out by an expert in the area you're looking at buying in so that they can advise on any potential issues with the property.
Planning permission is another important consideration when buying a property. You need to ensure that the property is zoned correctly, does not encroach on any servitudes and is built legally.
It's also important to consider who will be responsible for paying local taxes and other fees. If there are any additional taxes that will affect you as an owner or rentier, make sure you know about them upfront so that you don't get caught out when it comes time to pay them!
Structural damage isn't always immediately visible, so if you are not a seasoned professional, it might be worth the money to get a professional inspection report done. This report will highlight all issues with the property, not only structural, and can be very useful when negotiating for a reduction in the selling price.
Carrying out due diligence on your project will not only help you make the best possible evaluation of your chosen property but also save you both time and money in the long-run.
The first step to protecting yourself is knowing what you're getting into. If you are not sure, ask someone who is. If possible, hire a professional to conduct due diligence on your behalf.
Conclusion
We hope this article has helped you understand the importance of carrying out due diligence on your property and how it can save you both time and money in the long run.
