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This episode is a business coaching course that explains what due diligence means in real estate.

Results-Focused Training, Tools, and Workshops from Expert Business Coaches.

Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Lesson Nugget: Due diligence is the process in which the buyer takes the time needed to do all of the research he/she needs to do before making a purchase.
  • Due Diligence: The process of examining a property, related documents, and procedures conducted by or for the potential lender or purchaser to reduce risk. By applying a consistent standard of inspection and investigation one can determine if the actual conditions do or do not reflect the information as represented,

due diligence mentorship like teamtreehouse, find an alternative to lynda.com


-We are here in sunny San Diego on Thrive15.com, an alternative to lynda.com . With Michael there is no real estate topic too obscure Burer to talk about a topic that I'm passionate about, that you're passionate about, that San Diego's passionate, that America's passionate about, that other countries are passionate about, other planets are passionate about, other galaxies are passionate about. It is due diligence.

You hear this term thrown around. They say, yeah, do your due diligence. You'd better do your due diligence. What does that mean though? I'm going to read the definition and he's going to explain to us what it means in layman's terms that my third grade mind can handle. So here we go.

Due diligence-- the process of examining a property, related documents, and procedures conducted by or for the potential lender or purchaser to reduce risk. Applying a consistent standard of inspection and investigation, one can determine if the actual conditions do or do not reflect the information as represented. What? What does that mean, my friend?

-So when you're evaluating an investment opportunity this would be all the work you would do to determine if it's measuring up to what you expected. So for example, if you're buying a office building you would look at-- review all the leases, you would read them, you may interview the tenants to make sure that the tenants are actually happy with the building and want to be there. You would review the expenses and make sure that the expenses are accurate for that type of a building. You would inspect the physical property and determine if it's in good condition.

-What kind of things do you find when doing due diligence where-- let's say you have an agreement. You haven't signed anything yet but you have a offer and you're thinking about buying in somebody's building. And then you're doing your due diligence and you find uh-oh. What kind of stuff do you find in there where you go uh-oh?

-Well, you may have a seller that says, look at this beautiful building. The broker's telling you how wonderful this building is. There's beautiful pictures of it in the offering memorandum but you get in there and start looking up close and the air conditioning system's shot, the roof could be bad, maybe all the tenants that you were counting on are having financial troubles and may stop paying their rent. Those are things you would be examining and considering as you do your due diligence.

-How much of your time is spent-- let's say you have a deal and let's say you're going to spend 100 hours total. I'm just making up the number, but if you're going to spend 100 hours on the deal total, how much of that time is spent doing due diligence?

-The bulk of it, and that's the key. Knowing what you're buying.

-Really? I've heard it said over and over by real estate investment gurus. You make your money when you buy, and you need to do your due diligence to figure out of it's a good deal. So you're talking to me and the majority of the time is spent doing due diligence.

-Absolutely, and it's not too bad things you're looking for. Sometimes it's upside or positive things that maybe other buyers don't recognize.

-I was doing some due diligence and preparing to share how much I appreciate you being here, and I came up with this little diddy, if you will. I wrote this down last night, and I wrote it out with a pen and I want to read it to you here. Good penmanship I used as well. Even the longest of words couldn't explain the entirety of the appreciation I have for you discussing due diligence with us today.

-I'm touched.

-Didn't that feel like a lyrical miracle?

-It is. Boom.


That was Michael Burer and Clay Clark on Thrive15.com, an alternative to lynda.com

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