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Effective Due Diligence Can Create Millions in Value within a few weeks or months | International Residential Real Estate Investors Association
Wednesday January 24th 2018

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Effective Due Diligence Can Create Millions in Value within a few weeks or months

A couple years ago, we identified successfully acquired a small property and doubled its value  in only a few months.  This success was created by careful examination of the surrounding competitors, property expenses,  and lease contracts.  We successfully increased monthly revenue 10% the first month and 33% in the first quarter.  By the close of the first year revenue was  up 50% from closing and the value  was almost double generating a 3X value increase for initial investors.

Achieving this kind of result requires more than cursory  analysis and requires high end financial and operational review.

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One Response to “Effective Due Diligence Can Create Millions in Value within a few weeks or months”

  1. 062291va says:

    The appropriate level of due diligence (“DD”) for a transaction, apart from the lender’s requirements, normally comes down to the buyer’s appetite for risk. If the buyer thinks they’re getting a bargain and the property has minimal issues, we find a buyer may (despite our standard advice to do as much DD as possible on a deal) proceed with minimal DD if the lender is ok with this (or if there is no lender involved).

    On the other hand, a property with multiple tenants, zoning/development problems, and possible contamination can require a large DD spend.

    Neil’s comment about seller/vendor warranties is useful, but these type of warranties can only be relied on as long as the seller/vendor stays solvent – if a seller/vendor goes broke (or absent) after a deal has been completed and a buyer needs to pursue a seller/vendor for breach of warranty, the only option is usually litigation, which may not produce a satisfactory result for the buyer.

    Can I recommend everyone reading this to get a lawyer involved as soon as possible in a transaction (ie, before a contract is signed) – yes, we are a cost, but the cost of not having us on your side is often greater down the track.

    Oliver Meehan – from LinkedIn Q&A

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