Benjamin Franklin once said “An investment in knowledge pays the best interest.”

Everybody discusses due diligence, but how many investors really understand what it denotes to perform thorough due diligence on a possible investment, much less do it? Due diligence is the method of scrutinizing every aspect of a transaction. In the case of a real estate deal, it entails a means of getting to know each facet of the property that you are planning to purchase. It additionally involves doing due diligence on yourself - knowing each aspect of your own investment endeavors!

Though every investor will have totally different requirements on the guidelines, the bottom line is still the same… Knowledge is Power! The more you could know regarding what you are buying, and the clearer you could see how an investment would bring you closer to your personal financial independence, the more triumphant your venture would be.

When you are assessing your next real estate property investment, allow me to share a few queries you must ask. If you do not know the answers, start asking.

1. Does the property meet your required cash flow aims?

2. Do you have an exit plan set? Re-sell, re-finance, buy and hold?

3. For how long do you desire to keep this real estate property (keeping in mind your exit plan)?

4. Does the area show signs of economic expansion? (Do you see any new developments, projects, et cetera. that will contribute to future appreciation?)

5. Is the price within market value? (Have you ever looked into the amount of comparable real estate properties previously sold within the same location. What are the conditions of the purchase and/or lease arrangement?

7. Have you verified the age of the real estate property, hence determining any possible improvement or repairs required at the present or within the near future (roof / electrical / plumbing / cosmetic)?

8. Have you seen all of the taxes involved? How about utility costs and zoning restrictions?

9. Have you ever checked the title status / insurance?

10. Is the current rental income over / beneath market price?

11. Are all legal arrangements in order (signed by real tenant(s), without hidden clauses, and so on)?

12. Is the rental agreement transferable to a new owner?

13. What are the lease revenues deposit arrangements?

This is often just a preliminary list… I suppose you must expand it, based on your own criteria.

Keep in mind, the name of the game is: Do not be terrified to ask questions till you get clear answers! Scan all papers meticulously, and last yet not least, (hear the alarms on this one!) do not give any deposit away to the developer if it doesn’t move through a trust account of a third party lawyer or notary!

If everything meets your needs, the property should generate a good stream of passive income, and your new acquisition would be one which you’ll relish for more years to come. In the end, property investment could reward like no other investment could. However you must make your judgments dependent on certain due diligence information - not feelings.

Make way for your investment to be an asset, not a liability; make it work for you by gaining more information and, so, power over your financial destiny!

Another great article by Edmonton Real Estate