Due Diligence for the Real Estate Investor: Part I
By [http://ezinearticles.com/?expert=Conrad_Miller]Conrad Miller
Part 1 of 2
One of the most important things that you, as a real estate investor, must do thoroughly and well is perform due diligence. Due diligence is researching and finding out everything you can about a property and its owner(s) at the beginning of your investment process - before you even meet the owner. It is absolutely essential in making sure that you are not getting into a situation that you would be unable to handle or make a profit in. Due diligence is homework. I know how much we all love homework, but in this two-part article we will discover just how crucial it is in keeping you safe and smart.
Due diligence should be done at the beginning, way back when you have found a potential property but have not met with anyone yet. It involves researching the property and the owner and seeing if there are any holes or cracks that could cause trouble down the line. This investigation is very involved, but after you get the hang of it, it should not take much more than an hour per address.
Most of the information you will be looking up can be found online through your county's public records website. Please note that Utah, New Mexico, Kansas, Indiana, Mississippi, and Wyoming are non-disclosure states. They do not have their public records online. If you are looking at properties in these states, you must contact the private companies that hold that information and request it.
These agencies can be found at rel=nofollow http://www.firstamres.com or rel=nofollow [http://www.dataquick.com]http://www.dataquick.com. If you are not looking into records for any of those six states but cannot find what you need online, perhaps your county is a little behind-the-times and simply has not posted them yet. In which case, call your local office and see if they can help you over the phone. If you still are not getting the right information, you just might have to go down to the courthouse and look it up yourself.
The first pieces of information you must look into involve the property itself. Find out about any unpaid taxes or liens against the property's title. This can be done through a fairly routine title search. However, a word of caution: there are at least a dozen different kinds of liens that can be placed against a property's title. These range from what you might expect (tax and judgment liens) to things which seem completely random (child support, contractor, and welfare liens). It is highly recommended that you hire an experienced professional to do your title searches, because missing just one thing now could cost you thousands of dollars later.
Looking at the tax and lien history on a property is not all that needs to be done. Due diligence also includes researching the demographics of the area where the property is located; crime history of the building and neighborhood; sales history on the property; zoning; flood zone maps; comparable sales in the area. Another thing to look at is potential or pre-existing environmental problems. In the neighborhood where I grew up, there was lots of undeveloped land behind our houses. Why? Decades before there had ever been a neighborhood, that land had been used as a dump. As children we would go for walks through the woods and underbrush, and we could see orange and green chemicals oozing out of the earth. The township later zoned the front land as residential, but it is unlikely the back land will ever be built upon. You never know what kinds of environmental hazards may exist on a property that you are looking at, and eventually someone will be going through old records and find them. It may as well be you before you buy a property!
My name is Conrad Miller; I am a real estate investor, entrepreneur and small business owner in southeastern PA. My company, Terra Proficio Inc., specializes in wholesaling both ugly and pretty homes as well as rent-to-own and lease/purchase options. Our webpage for those seeking to purchase a home is http://www.terraproficiowholesalers.com and for those who may have a home they need to sell fast is [http://www.letconradbuyit.com]http://www.letconradbuyit.com. We are often able to close in as little as 7 days, depending on the circumstances. We are willing to look at ALL situations; negative equity, pre-forclosure, and properties that require extensive renovation are all okay with us. Contact us via our webpages for more information.
Article Source: [http://EzineArticles.com/?Due-Diligence-for-the-Real-Estate-Investor:-Part-I&id=6763305] Due Diligence for the Real Estate Investor: Part I