Profitable Investing – Areas Of Due Diligence

By on February 8, 2014

If you are going to inject your hard earned money into an investment with the possibility of including a long term financing repayment agreement, it only makes sense to conduct thorough due diligence before going ahead.

The most important part is of course to investigate if the deal you are looking at is a legitimate one. Because you can expect sellers or promoters to say the best stuff about whatever they are selling, understanding the economic, social and political risks involved with the investment is required so that you can make a calculated decision. Here are some of the important areas of due diligence to scrutinize for your real estate investments.

Age and condition of the property and those in the area. If houses in an area or neighbourhood are all in bad physical condition, it could be a sign that there are underlying problems in the area. So much so that home owners cannot be bothered anymore to do up their homes. Since we are on the topic of area, avoid areas where they is a big existing presence of investment properties. The simple logic is that you will be vying with experienced competitors for tenants. It also show that there is no genuine demand for homes in the area from home owners.

Drainage. You wouldn’t really know how disastrous water can be until you run into flooding. Even if actual flooding lasted for just half a minute. Drainage is something that we often fail to appreciate or notice until bad things start to happen. If an area is prone to flooding, the best thing is to stay away from it. It is a problem that is tough to eradicate even after better drainage systems are constructed. These problems are caused more by contours and the shapes of the landscape. It is a better idea to avoid rather than live in fear.

Building and zoning codes. This can tell you the potential of the property and the area. If you happen to notice that properties in the area have a practice of not following these codes, it is a sign that it is neglected. There must be some reason for these areas to be neglected by the authorities for enforcement.

Crime rate. It is a reality that neighborhoods and areas have different crime rates. In some cases, the rates can vary with very high variances. Unless there is a particular reason why you want to invest in places with high crime rates, do think thrice before making a decision. Businesses and populations could already be avoiding the area taking away the potential for growth with them.

Proximity to undesirable concerns. Your property could be located near industrial complexes with noise pollution or even exude undesirable smells. Air pollution can also hurt your health. A tenant has many options and can easily pass up on your property for the smallest reasons. Look at more alternative investments if you have yet to commit to a property in areas like these.

Proximity and accessibility of amenities and infrastructure. Areas that have easy access to highways and train stations is a sign that local authorities see potential and future developments planning could already be in the works. If amenities are already prevalent, there is also a higher likelihood that if more developments are to take place, it will take place here.

Traffic patterns. Generally, the better human traffic an area has, the more valuable it is. This is especially so for properties that has a commercial interest. But take note that many tenants also prefer quiet areas that gets them away from the vibrancy of crowds and activities.

Physical inspection. You would be wise to hire a professional to inspect the property properly. If you are doing it yourself for some reason, the main areas to scrutinize include the roof for structural defects, foundations for sinking and cracks, walls and basement for mold contamination, safety hazards concerning electrical wiring and fire, water seepage, sewer lines damage, pest infestations, deteriorating wood condition, etc.



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