The Smart Investor Real Estate Quick Tip Series – The Beginning
So welcome to the first segment in our Smart Investor Quick Tips Series.
As a real estate syndication company we partner with private investors to buy multi-family properties in exchange for an equity share. We get lots of questions related to real estate. Many people know real estate is an amazing investment vehicle but don’t quite know all the in and outs about how to do it, or all the benefits it can provide to investors. So hopefully this quick tip series will answer some of those questions. We all want to be a smart investor, and that starts with education!
So let’s get started.
Today’s topic is is about due diligence.
One of the key phrases we hear in the real estate investing world is “Due Diligence”.
According to the Oxford Definition of Due Diligence is
A comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential.
Seems logical right?
We certainly don’t want to inherit all the shortcomings of the property. So we need to know what we will be getting ourselves into once we take possession of the property. Doing our homework could be the determining factor in whether or not the deal we are analyzing is good, bad, or downright ugly from a profit’s perspective.
But as a smart investor we need to do more than due diligence on the physical properties we try to purchase. Yes it’s important to know if there are structural issues with the property. We need to know if there is deferred maintenance. We need access to rent rolls and profit and loss statement to evaluation the strength of the property from an investment perspective.
We also need to investigate EVERY aspect of our business:
- We need to investigate the best entities that will hold the assets for both legal and taxation reasons.
- We need to find the right accountants to ensure we have ones that extensive experience in investment properties as we want to ensure we get all the tax benefits we can.
- We need to investigate all the securities requirements to ensure we know how to apply the right exemptions with respect to raising capital.
- We need to interview and find the right Property Management Company that will be the best fit to implement the activities we want to increase our property’s Net Operating Income (NOI), and hence increase our profits.
- We need to find the right financial lender(s) that will help us close the deal
- We need to research the market to make sure it meets our strict criteria and talk to locals such as the economic development group, the police with regards to the crime status of neighborhoods…etc. etc. etc.
Pretty much every part of your real estate investing endeavors needs to be researched. So don’t limit your homework activities to just the physical aspects of the property.
Sign up for out multi- family video series, so you can see other key elements that need to be considered if you want to invest in multifamily assets.
That’s it for today’s segment of the Smart Investor Quick Tips. Stay tuned for upcoming segments . Until Next time…Bye! And remember ……