Due Diligence

By Christina Suter on Nov 01, 2014 at 12:24 PM in Real Estate Issues
Due Diligence

The most important element in your investment and in due diligence, is the vision in your head. The passion and drive you have in your head is what will make you a successful investor. You already have a vision of the money it will bring you, but what you’re really after is what the money affords you, the freedom, joy, feeling of happiness, relief, relaxation, and enjoyment of your life. The joy of creating your destiny is why you’re investing in real estate.

Why are you investing?

Tony Alberts, during his speeches says, that he’s an idiot. He clearly isn’t but at full volume he declares that if he can do it, than anyone can. Anyone can choose to participate but it takes a depth of leadership to be successful in it. The one thing Tony does right is he hires people who are smarter than him, because he knows his limitations. If real estate is your path, if you see the vision, and know what you’re good at, and what your limitations are, you can augment where you are and hire people to help you.

-Lemon or Gem-

When I look at real estate as an investor, I look at four things from the investor’s point of view and askm what is the deal?

1. Direct ownership active. This is where you own some units, residential, office, retail, storage, mobile homes, etc. and you run it or have a management company run it for you.

2. Directly securitized- you have a loan, note or trustee to help renovate a property, fund a flipper, seller financing, etc. You make money on your money; you’re the bank and someone else does the work

3. Direct ownership (securitized, but passive)- Your securitized interest is being handled by a broker or general partner who make the decisions. You don’t make the decisions. You are limited in your liability and control. The disadvantage is that you don’t have a lot of control.

4. Indirect ownership- you have no ownership, you only have a share. The fund owns, you can’t take property with you if you’re unhappy, because you don’t have the title.

When the dot com bubble bust, I lost money, but fortunately I made the same amount in real estate. Because I diversified, when the stocks and bonds lost, and real estate flourished, I wasn’t financially devastated.

Consider what the due diligence you want your investment to do is. It’s a funnel, you work your way from the outside in, and vice versa. Think about the return on growth? How long you want to deal with it, how often you want to move the money, and whether it will have positive aggressive growth for that city.