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Due Diligence: Avoiding the Property Lemon."Did you do your Due Diligence?" It's a funny term, but I am still surprised at the questioning looks I get when I ask this question. Put simply, Due Diligence is a series of tests and checks (done diligently, of course...) to make sure that what you plan to buy is actually worth what you're paying for it. It's all about ensuring that it's not going to cause you a load of expensive repair, maintenance and legal headaches. It's also part of working out how much you need to spend if you decided to go ahead and buy the proverbial "renovator's delight"... There are several factors which make up a Due Diligence test on a property:
Whatever you do, as a property investor (or even as a homeowner), don't kid yourself that you can purchase a property without one or all of these factors checked. Make sure, also, that all the relevant inspections you get are totally independent.Don't take the word of the vendor's real estate agent that they know a good valuer/building inspector/pest inspector who will do you a good price because of them. I will confess that we made this mistake with our first investment property, and we paid for it dearly later! If NSW government regulations change, however, this could become more difficult. New laws to be introduced in July 2010 may see the cost of inspections put on to the vendor. While this may save the purchaser a great deal of extra money, this leaves the system open to abuse by unscrupulous inspectors in cahoots with vendors and agents. We will have to see how the system is designed before I will be completely satisfied of its reliability.
I promise, as you view and purchase more properies, you will get better and faster at spotting the lemons before you get too far! Do you have a question about Due Diligence?
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