Property Due Diligence

May 21, 2009

When you’re looking for information about how to buy land or choose a property location, whether it’s for investment purposes, building a second home, or a little R&R (recreation and retirement), you have to undergo some research. How much or how little research you undertake is up to you. Since your real estate investment is likely the largest investment you’ll ever make, plan to take more control of the land buying process by educating yourself. After all, this is time that you are investing in YOU. The more you learn, the better off you will be when it’s time to negotiate. Perform your research on 3 scales: broad, local, and site-specific.

Broad-scale research starts with narrowing your location search to a particular region or state. When you’re looking for property, there are a number of factors to consider, of course. Climate is a big factor for me, but you might be looking for factors related to occupation or family proximity. You probably will want to consider market appreciation as well. I think we can all agree that buying land and recreational property is a good investment. But some markets will always be better than others. I’m from the Inland Northwest where there are a lot of lakes, rivers and streams. Lakefront property is prized for its development and recreational value, and as we know, they’re not making any more lakefront. You might also want to find out what states are gaining population. What states are losing people? What counties in each state are good or bad?

Once you have chosen a state or an area, you can start your local research into buying that perfect parcel of land or recreational property. Affordability and access might dominate your land search at this stage. For example, you might require a piece of property within a convenient location of good schools and work. Perhaps amenities such as hiking trails, public boat launches, and golf courses are what you’re looking for. Is the local economy healthy? Is it dependent on one major employer? Consider the outcome of owning real estate in a market where the only employer in town closes up and leaves town.

Finally, you found it. You found a location you really want to invest in. Now your education really begins with site-specific research necessary to buy the land you want.  Due diligence is that research process. A buyer investigates obvious issues, tests, disclosures and representations, and verifies the condition of a property before closing on a sale. The research or due diligence process is the responsibility of the buyer (you), not the real estate agent, the appraiser, or your lawyer. Due diligence guarantees that you have the best opportunity to verify the property is what you want.

I have some really good tools for conducting your broad-scale research, but you’ll have to read my next post to find out. Site-specific due diligence is my specialty. If you want more information, stay tuned and keep reading. I’ll be including some of this information in my blog until my book, The Complete Land GuideTM is finished. Until then, see you next time…

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