This is a sample due diligence checklist and does not guarantee the property is financially or materially sound if all measures up. It should be used as a guide only. The onus of carrying out due diligence is on the buyer and is critical, particularly when buying a property in an unfamiliar area.
Financials
To verify the property’s income, try to obtain:
- Current and/or past rental agreements signed by the tenants and specifying the rental amount
- Any rental histories showing late payments, problem tenants, etc.
- If there are any empty apartments in the same block
- Vacancy rates for comparable properties in the area
- Current property management fees
- Property tax
- Strata levies
Property Area
- Location of schools, shops and essential amenities
- Public transport availability
- Key economic drivers of the area
- Population stability
- Unemployment rate
- Accommodation vacancy rates
Property Interior Inspection
This is to get an accurate status of the property’s current condition and what maintenance may be due. Look for:
- Pest problems
- Old or damaged appliances that come as part of the property eg water heaters
- Any water or fire damage
- Paint
- Flooring/carpets
- Windows and window coverings
Property Exterior Inspection
- Roof condition & age
- Electrical and plumbing systems up to date, and to code specifications
- Heating, ventilation and cooling systems – age and condition
- Paint and trim condition
- Driveways and parking areas
- Landscaping and irrigation systems
Service Agreement Reviews
To know what contracts and agreements are currently in place, and whether they will transfer if applicable to the landlord. You need to check who is responsible for these services and where they’re at:
- Property management agreements
- Cooling & heating system maintenance
- Laundry machine contracts
- Cable or satellite television services
- Alarm system services
- Landscaping services
- Snow plowing services
Past Records
- Get 24 months’ income and expense statements for the property, if possible
- Look for any anomalies in the books (expenses too low, income too high)
- Review the current rent rates to see if rents are under or over the market for the area
- Utility bills for the previous year
Follow Up
- Get an accountant to review any unfamiliar documents
- Have your solicitor review your offer and other paperwork
- Ask your solicitor about any other due diligence you should do
- Take notes on any problems, and list costs to correct, to use for subsequent negotiations
Try and use accountants and solicitors who are familiar with foreign investment properties and have done it before. Some of the terminology may be foreign at first so it’s useful to use someone who’s familiar with the process.
