What are your due diligence checks?

I recently documented my due diligence checks and wondered if anyone would be willing to share their own.

Mine are as follows - interested i feedback or additions;

1. What is Property Management cost?
2. What are council rates?
3. What are water rates?
4. What are conveyencing costs?
5. Get a quote for landlord insurance online for subject property?
6. Is the property affected by floods?
7. Does the property have any easements that prevent future redevelopment/build?
8. Is there nearby employment?
9. Is there nearby major shopping centres?
10. Are there large major big format retail stores - Ikea, Bunnings, Masters, Costco etc?
11. Is there nearby train/bus?
12. What is the distance to the major motorway?
13. Is the property close to noise pollution sources - motorway, trainline, childcare, school
14. Is the property close to schools?
15. Is the local council pro-development and have a vision for the future?
16. Is there nearby recreation facilities - river, parks, ocean etc?
17. What are the historic population growth statistics, what are the future population growth?
18. What do similar properties rent for?
19. How many property are currently listed for rent in the area?
20. What is the vacancy rate for the suburb?
21. How long do properties take to rent?
22. What have been the historic growth? (I'm particularly interested in suburbs that haven't had a recent spike in growth)
23. What is the gauge of the social sentiment for the suburb (use PropertyChat as a guide)
24. How many properties are for sale in the suburb for current month? <SALE>
25. How many propertys were sold in the past year? <SOLD>
26. Calculate (<SOLD> / <SALE> ) which provides a metric of demand A rising number over the past couple of months indicates a rising market, A falling number indicates falling market

 

nice list!

I may have missed it in there but I would do DD if there are any ways to add value. Its probably one of the first things I assess, but that suits my strategy.

 

How about the actual property itself?

• Orientation.
• Slope of block.
• Views, potential views if built up.
• Construction materials used.
• Asbestos?
• Quality of construction.
• As Leo suggested, value add options.
• Street gas supply.
• Overall street appeal.
• Is the layout and style of the property fit for the area/target market?
• Etc,etc

 

Perfect - exactly the additional information i was looking for...

As i had been looking from interstate and tempted to buy sight unseen - these are the things that i should somehow take into consideration!!!! Although not really sure how i can do this, other than streetview ;-)

 

You can quite easily find all these out via correspondence.

Such simple things like orientation, more important for PPOR, can be easily overlooked if not considered.
A poor orientation can make home life very uncomfortable and can really affect your mood in both good and bad ways.

 

Definately my house faces north and the sun in the morning is amazing on my front steps whilst across the road theres nothing.

 

It's a good list and a good thread.

I would add the various reports you get from dial before you dig at www.1100.com.au

 

Thank you for the list. It is certainly very useful. However, I have found, as a newbie in property investor, that actually the answers you received might be the challenge when assessing whether buying or not. What questions are deal breakers? if you get 60% positive responds is that enough? Would you still buy? Questions like number 19, 24 or 25 are hard to assess and may have different meanings.

 

You could also throw in;


· How does the property meet your financial requirements?

· Stage of the property cycle



· A comparable sales analysis with 300m (last 3 to 6 months)

· A comparable rent analysis within 300m (last 3 to 6 months)

· Historical sales and rental analysis of the street

· Current median suburb yield to historical yield analysis


· Floor plan analysis (for property type and location)

· Property potential analysis

· Positive cash-flow or ability to make it so

· List of fixtures and fittings of the property

· Property frontage and site dimensions

· Trees on site

· Access to rear yard

· Contours of the site (water is often not your friend)

· Council application’s (DA’s for the site)

· Zoning of the site

· Block size to suburb median size

· Add value potential (property value and rent)

· Location identification of all the services to the property


· Property resale potential / appeal to market segment

· Negotiate access to rent the property pre-settlement

· Smoke alarms location

· Electrical safety switch

· Property overlays

· Approved (and unapproved structures)

· Median price and rent per type and No. of beds (analysis)

· Days on Market

· Average discounting

· Online search interest

· No. of renters in the suburb and street

· Auction clearance rates

· Unit to house price differential


· Average incomes to median property value ratio


· Approved DA’s

· New housing stock under construction

· New approved and planned infrastructure

· Average historical price differential (trend) compared to neighbouring suburbs


· Age of appliance (effective life of them)

· Average tenant lease term per age group


When you get to the end of this list you’ll find that many properties do not meet the grade.

 

Great checklists people. I would also add:

- All keys to all locks and all fobs/passes accounted for
- Codes to any alarms
- All fixtures and fittings in working order

 

Curious to know how everyone actually records answers to these checklist questions? Do you have a spreadsheet set up and work your way down it, filling in the answers as you go? A notebook you write ansers in? A checklist that you refer to and assess the property off, but don't record answers against?

I have a number of 'Due Diligence' checklist items that I research, mentally give a yes/no and move on. I'm yet to find a way to properly record this information in a useful and straightforward way.
Would anyone care to share their due diligence 'process'?

 

Simple spreadsheet with tick options and some room to add comments. Doesn't need to be too complicated. Some things should just remain as they are, simple.

 

Everything is on a spreadsheet and items such as those that I listed are also detailed in the contract.

Additional items such as taking date and time stamped photographs at the inspection and keeping scanned copies of the marketing of the property have also assisted at settlement if there us a dispute.

The last settlement the vendor changed the almost new dishwasher to a much older not working model.

 

Thanks Leo and Chilliblue.

The tick option and comments makes sense. I have an affinity for quantitative metrics and struggle with comparing qualtitative information.. was a real struggle trying to incorporate that into my DD spreadsheet!

I will have to revisit my own DD process and simplify things to make it more usable.

 

Pool inspection e.g. filter/chlorinator age, stains, light works, cleaning equipment works etc.
Pool structural inspection
Roof inspection e.g. condition of tiles, pointing, guttering condition/fall, glaring faults etc.
Sanitary and storm water CCTV inspection

 

I agree with the complete list and apologies if I didn't see it on list, however a personal thing for me is I like to hang around the area at night to check for unruly behaviors, drag racing, hooligans or other undesirables.

 

Good question. I'm curious too as to what people do. there's no point keeping a record if it's a "no".
I think it's a guide, a lot of those things are done before you even target an area. Then you start comparing apples and oranges, weigh up the pros and cons of each property and look at the short listed few as a "package deal" and which works best for your strategy, then pull the trigger.if you miss move on and keep filtering through

 

After looking at all the DD checks i think if someone were to do all of them or even most, it would become too restricitive and time consuming, probably losing out on many good deals. I would be picking my top most important ones only.

 

Which items would you leave out Leo?

 

Depending on the dwelling and the reason for its purchase, i would then choose the top DD cirteria that is relevant my particualr purchase and probably leave out things that arent top importance. What each person will decide to leave out is really up to them. Dont get me wrong, i think thorough DD is really important, but there also needs to be a practical element to it. If i look at all the DD above, im sure there are at least a couple ive never done - but its probaby becasue it wasnt the most important for that paticualr purchase.