My understanding when people use the phrase 'due diligence' they mean the act of calculating the pros/cons and numbers associated with purchase of a particular property, such as the purchase price, rental yield, rental vacancy rate, past suburb growth, depreciation, need for repairs, potential for renovation & cost vs benefits of same etc. Is that right?
Also how does one use RPdata, Residex (or other data searches) in all of this?
Yes that's exactly right.
Numbers are VERY important. I know when I bought my first property I had no idea how much it was even going to cost me each week. I just knew I wanted to buy houses. Luckily it was the year before the biggest boom Sydney has ever seen.Plus research into the area- infrastructure (or likely changes to infrastructure), transport (how do tenants usually get to work?) Sometimes people overplay a trainline. In a particular area most families may own 2-3 cars and not many people travel to work by train). OK I'm overplaying but you get my point. You need to know what the area expects. Eg some people say "I would never buy a unit without a garage" but in the city most people that live there don't own a car.
If you know an area really well, when something good comes up you'll know it straight away.
Yep you are right!
Due diligence just refers to doing your research, extensively & as accurately as possible.
Thanks catalyst. That's what I have been doing without realising that is what everyone called it. I made up an excel cashflow flowchart that I can plug in interest rates, price, rent, and then it calculates everything else. (Using guesstimates for rates, land tax, and set percentages for managment fees.)
What about RPdata, residex etc? How do you use these properly?
Residex is a computerised modelling report which provides comparative analysis of similar properties and can be useful to compare other recent sales.
Shoot me an email if you want a Residex report done on any property as i have subscribed to the whole of Australia and I would be happy to run one off for you. It helps me with my due diligence on inter state property purchases.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
