Real Estate Trivia – Due Diligence

Due Diligence is the investigation or audit of a potential investment or product to confirm all facts, according to Investopedia.

How should one do their due diligence when purchasing a buy-and-hold investment property?

1) There are 4 stages in the due diligence process, which of these is not one of the stages?

1. Pre-Offer Due Diligence
2. Pre-Acceptance Due Diligence
3. Post-Acceptance Due Diligence
4. Renegotiating (if necessary)
5. Final Decision or Walk Away

2) Which of the following should you consider as part of your first step due diligence?

1. Area Crime Rate
2. Occupancy Rates
3. School Rankings
4. All the Above
5. None of the above

3) Which of the following should you focus on during the second step of your due diligence?

1. Physical – walk the property
2. Financial – current rent roll, aged receivables report, list of recent capital improvements
3. Legal – HOAs, liens,
4. Inspections – Lead, asbestos, radon, pests
5. A, C, and D
6. All the above (A, B, C and D)

4) When should you plan on re-negotiating?

1. Never
2. When you determine that the property is not what you assumed it was going to be.
3. Always

 

5) When should you be willing to walk away from an investment?

1. From the very beginning of the negotiation, until the ink is dry on the settlement statement.
2. Only when you discover the property is rat infested.
3. Only when you discover you can’t get funded.
4. Only when you discover the zoning is going to change and that it will hamper your occupancy rate.
5. None of the above

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