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Due Diligence (DD)

Discussion in 'General Property Chat' started by New2prop, 14th Oct, 2016.

  1. New2prop

    New2prop Well-Known Member

    Joined:
    26th Jul, 2016
    Posts:
    70
    Location:
    Sydney
    What does due diligence (DD) mean to you? At what point do you think you have done enough research/ analysis to make an investment? Please point me to any other resources if they already exist. I am just listing down some I am thinking of and hope you will share your thoughts.

    Macro: keep an eye on the below and ensure it is not just turning to or is hugely negative:
    World economy
    Australian economy
    State/ city economy

    Micro:
    Location/ suburb economy- new infrastructure/ supermarkets/ hospitals/ schools/ station or continuing normal activity as against negative indicators

    Location/ suburb demographics:
    - generally what type of owner occupiers or tenants live there? Office goers commuting to CBD, miners, tradies, students at a nearby university
    - income demographics to support the expected rent, growth potential

    What streets/ locations within the suburb you want to pick - couple of streets away from schools/ uni, super markets, stations, main roads

    What streets/ locations within the suburb you want to avoid- on the roads close to or behind schools/ uni, super markets, stations, main roads/ motorway, creeks/ water bodies (flood risk), parks, industries, hospital (noise)

    Who is your target tenant or buyer:
    - what type of properties are common? If generally independent houses exist with land available, don't plan to build duplexes or units.
    - families with younger children - fenced backyard/ pool
    - retirees - potential for single level instead of properties with steps, small or no lawns, may be have space for a small garden

    Comparables:
    How much has a similar property sold for recently on the same or neighbouring streets?
    Potential to add value through minor reno or sub-divide

    What are your go to websites/ resources for doing DD and for what purpose?

    Please share your thoughts.
     
  2. bob shovel

    bob shovel Well-Known Member

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    Somewhere in the land of Oz
    I just do what everyone says here, best double d's i know. isn't that what everyone here does?
     
  3. Big Will

    Big Will Well-Known Member

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    I go with Cadbury's motto of a glass/cup and a half.

    I cup and a half in each hand is the right amount any less and you are not fully ultlising your hands and 2 cups you have to much you it is spilling everywhere.

    A good cup and a half... yup ;)

    [​IMG]
     
  4. Big Will

    Big Will Well-Known Member

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    Melbourne, Australia
    You need to understand KISS, pick a couple of areas that you have good knowledge about and build on it and then expand if it doesn't suit.

    No point picking Toorak development blocks if your budget is 400k so you really need to understand what budget and what you are looking at buying.

    A lot of the stuff you would do if you were completely knew to Australia or the town.

    However you get a good sense when you are on the ground driving around a suburb.

    Most of mine is spent looking at what is up for sale and what has recently sold but I am not looking at investing in to areas I don't know extensively about already.
     
  5. wombat777

    wombat777 Well-Known Member Premium Member

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    At some point after a reasonable amount of analysis you need to take all the info on board and then make a decision based on numbers and gut feel. If you are taking more than 2 months to narrow down an area and select a property you are stuck in analysis paralysis.

    Focus on two parameters - vacancy rates and yield if you are just buying for cashflow. It is selecting areas that are balanced with reasonable capital growth prospects that becomes tricky. If you are buying in entry-level markets, for this focus on infrastructure and indicators of current and future gentrification.

    In terms of getting to know a market, onthehouse is a key resource for me as well as daily alerts on realestate.com.au and domain.com.au. I also like allhomes.com.au as it allows you to quickly determine land frontages, size and shape ( if looking for future development potential ). Also read up on the relevant council planning schemes/codes if you also have development as a consideration for down-stream add-value.
     
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  6. New2prop

    New2prop Well-Known Member

    Joined:
    26th Jul, 2016
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    Location:
    Sydney
    Thanks to all those who have replied.

    I am a bit disappointed that with all the great minds on the forum, I haven't received a structured list/ thought process to perform the DD.

    Any one with any additional thoughts - appreciated.
     
  7. Phase2

    Phase2 Well-Known Member

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    Location:
    Perth
    That's because everyone's strategy and approach is a little different, based on their personality/preferences, risk tolerance, current asset-base, income, family situation etc etc etc. What you value/rate in a property might not be valued the same by someone else. Some people might have 5 criteria, others might have 50..

    Point is, you need to build your own DD list, and refine it as you mature as an investor. There's plenty of info in these forums already. You just have to get busy with the search function :)

    This forum is a good place to bounce ideas around too, so unless you think you've got a world-beating strategy and don't want to share it, post it or subsequent questions here and I'm sure you'll get a lot of opinions! :)