Due diligenceEvery seasoned real estate investor will tell you that performing due diligence is key to making a sound financial investment. If you are adding out-of-state properties to your portfolio, doing an effective due diligence can be all the more challenging. But first, what is due diligence?

In real estate, the period of time known as due diligence is the opportunity to investigate facts about the physical and financial conditions of the property and area the property is located in. Put simply, it is the time to do your homework before deciding to move forward with the purchase.

While the time window is negotiated prior to the execution of the contract, it typically ranges from 14 to 30 days. As for when the clock starts ticking, that will vary from state to state, which is why it’s important to consult with a local real estate expert. In some states, you enter the so-called due diligence period as soon as both parties sign the contract.

Deciding on a time frame will require factoring in the amount of time needed to schedule appointments with inspectors and to review the paperwork such as HOA rules and regulations. Note that, unless negotiated otherwise, all inspections are paid for by the buyer.

We gathered some helpful tips if you are eyeing a property outside of your state:

Talk to the local county assessor: though an exact figure isn’t possible unless the property sells, the county assessor can provide ballpark estimate of the tax values of properties you are considering as well as surrounding homes.

Check pro-forma numbers: make sure to verify every number you are provided, such as insurance, rental values, and taxes. For example, if the property is in a disaster-prone area, this can significantly add to insurance costs.

Use online resources: use online platforms such as Zillow and Google Maps to your advantage. In addition to getting a better grasp of average rental values and asking prices, sources such as Google Street View may give you a good sense of the neighborhood where the property is located. Some websites will also allow you to check prices of nearby homes – just keep in mind that renovations and square footage will all affect the home’s value, so it’s important to compare similar homes.

Inquire about renovations: if the property you are considering needs repairs or a remodel, ask contractors to give you an idea of the scope of work, completion dates, and pricing.

Are you ready to plunge into investing in real estate? RLG has the tools and resources at its disposal to get you on your way and save you time. Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!

Recommended Posts