Regardless of whether you plan to own real estate in order to live in it or make money off its income as an investment property, it is not as simple as buying an appealing piece of property on the spur of the moment after walking through it.
While walking through the property is an important component of exercising due diligence as a potential property owner, the responsibility falls on you to ensure that you are making an informed purchase that you will be certain you can afford in the long term.
Furthermore, you need to put in all of the requisite time and effort looking over all aspects of the property and reviewing all documents related to it prior to buying it.
The types of diligent conduct that are vital to serving your interests as the potential owner of a property can be roughly grouped into three broad categories.
Searching For Information About Available Properties
Taking real estate & environmental due diligence with a piece of property allows a possible owner to determine whether it is viable to purchase over other properties that might be available in the current market. Ideally, you would dedicate multiple months to the process of looking over multiple, separate properties and weighing every one of their potential downsides before choosing one of them to purchase.
While looking at the Homeowner Association documents for your planned property is a complex and difficult venture, it is the only way to know for sure whether a property is in structural or financial dire straits. Otherwise, you may be forced to make more payments to address the community’s issues after you would have bought it already.
Personally Looking Over The Property
It is not enough to walk through the property and look at everything about its layout and design. You need to carry out a property inspection – and be personally present during the process – in order to allow contractors to estimate how much renovation must be applied before the property can become usable either as a residence or investment opportunity.
From there, you would need to be the one to gauge whether the property would be financially worth purchasing after applying the renovation process, which will always be highly expensive.
Finalizing Mortgage and Insurance Plans
It is up to you to find out how expensive it would be to have an insurance policy written for your property, if any can be written at all. Since writing a policy can easily become either impossible or overly expensive for properties located in zones prone to destructive weather, you need to put extra effort into acquiring insurance bids before pursuing properties in those locations.
It goes without saying that you should also make sure that you are getting a competitive mortgage deal. Try to acquire more than two bids in this area in order to determine that you are not saddled with a less workable mortgage than you could have.
Finally, look over the property abstract with the help of a lawyer and a title insurance agent in order to single out any remaining concerns about the property before purchasing.