Benjamin Franklin once said “An investment in knowledge pays the best interest.”
Everybody talks about due diligence, but just how many investors in reality understand what it denotes to conduct thorough due diligence on a potential investment, much less carry it out? Due diligence is the manner of scrutinizing each aspect of a transaction. In the case of a real estate transaction, it entails a procedure of knowing each aspect of the real estate property that you are aiming to acquire. It conjointly entails doing due diligence on yourself – knowing each side of your own investment objectives!
Though every investor will have different necessities on his/her guidelines, the bottom line remains the same… Knowledge is Power! The more you could know regarding what you are buying, and the clearer you could see how the investment will bring you nearer to your own monetary freedom, the more triumphant your endeavor would be.
When you are assessing your next real estate property investment, allow me to share a few queries you must ask. If you do not know the answers, start asking.
1. Does the real estate property meet your required cash flow aims?
2. Do you have an exit plan set? Re-sell, re-finance, purchase and hold?
3. For how long do you desire to keep this real estate property (keeping in mind your exit plan)?
4. Does the location demonstrate signs of financial growth? (Do you see any new developments, constructions, etc. that would contribute to future appreciation?)
5. Is the amount within market value? Have you ever considered the price of comparable real estate properties previously sold within the similar location? What are the conditions of the acquisition and/or lease arrangement?
7. Have you verified the age of the real estate property, hence determining any possible improvement or repairs required at the present or within the near future (roof / electrical / plumbing / cosmetic)?
8. Have you viewed all of the taxes involved? How about utility prices and zoning limitations?
9. Have you ever checked the title status / insurance?
10. Is the current rental income over / beneath market price?
11. Are all of the legal arrangements in order (signed by real tenant(s), not containing hidden clauses, and so on)?
12. Is the rental arrangement transferable to a new owner?
13. What are the lease revenues deposit arrangements?
This is often just a preliminary list… I suppose you must expand it, based on your own criteria.
Keep in mind, the secret is: Don’t be afraid to raise questions till you acquire obvious answers! Browse all documents thoroughly, and last but not least, (hear the alarms on this one!) don’t offer any deposit away to the developer if it doesn’t go through a trust account of a 3rd party lawyer or notary!
If everything meets your needs, the property should generate a good stream of passive income, and your new acquisition would be one which you’ll relish for more years to come. In the end, property investment could reward like no other investment could. However you must make your judgments dependent on certain due diligence information – not feelings.
Make way for your investment to be an asset, not a liability; allow it work for you by gaining more information and, hence, power over your financial destiny!
Another great article by Edmonton Homes for Sale
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