In my post, "The Owner Wants to Sell...What Now?", I stated you should get the contract, but have wording in the contract that it will be void if when you do due diligence, it doesn't prove to be a good deal.  First of all, what is due diligence?  When I first started real estate investing, there were so many terms used very commonly with out definition as to what it meant.  Just a simple explanation can give you the ah-ha moment.  Due diligence is simply doing the work to check out, or investigate to make sure the real estate, or deal is what you think.  It is one of the most important parts of real estate investing, but one thing that a newbie may overlook.  Another scenario is that a newbie will take so long on the due diligence before the contract, that they miss out on the deal.

    Today I will list important points to include in due diligence.  In future posts, I will go more in depth on each item.

• Comps:  What other properties in the neighborhood have sold for, and how it compares with this property, and what properties are now listed for in the neighborhood.
• Inspection:  A thorough inspection of a property, using a property inspector, unless you have the expertise yourself.  Most of the time you will want another set of eyes to look at it.  There could be hidden expensive things with the systems, or environmental (termites)
• Knowing Profit Needed:  I have already gone into depth on this in a previous post.
• Checking Mortgage Figures:  This is why you get the permission to speak to the mortgage company form completed.  Sometimes an owner will say they are only one month behind, then you find out it is three months.  Also, there are fees, interest, and attorney fees to take into consideration.
• A Title Check:  You need to know if there are any problems with a clear title.  Also, if there are any other liens, such as a second mortgage.
• Tax liens:  This sometimes comes up in the title check, but to be sure, specify a tax lien check.  Besides county real estate taxes, in some states personal taxes that are unpaid can be attached.  And a big one would be an unpaid federal lien.

• Neighborhood condition:  Unfortunately, the house may be nice, but the neighbor's house may be a mess, or the view is unsightly for another reason.  Or, a barking dog, vicious dog, or one that doesn't stay on its property, could hinder your sale of a house.

     Any of these items could be a deal breaker.  But, an experienced real estate investor can work around many of these problems.  I will be going in detail on these  problems, and how to work with some of them, in future posts.  To make sure you don't miss any of the future posts, Subscribe.  You can subscribe by email, or RSS.  Also, post a comment.  Comments are the only way I can know I am connecting with you.