PROPERTY ACQUISITION DUE DILIGENCE: 3 Important Items To Add To Your Checklist
As a general rule, prospective homebuyers understand the basic sense of due diligence. In simple terms, “look before you leap”. Legal due diligence which usually takes the most focus is only one of the important aspects. Full scope real estate due diligence is complex with many aspects to it. In broad terms, there are legal, financial, environmental, technical, cadastral, market and tax aspects to consider.
Out of these, Property value positioning within the local environment, professional home Inspection requirements and future market value are essential but often overlooked. You need to add them to your due diligence checklist. The challenges that arise in not properly investigating these details tend to bite on the tail after purchase is complete. If you are familiar with property acquisition in Nigeria, then you understand how frustrating this can get.
1. PROPERTY VALUE POSITIONING – Is the price right for this property?
When you consider the local market where the property is domiciled, are the parameters in your favor? This step in due diligence is the Local Market Value evaluation. You will need to take a look at the history of the price movements in that area. Rental value, capital appreciation, yield & ROI, market trends, and others are great options to start with.
You can enlist the help of a real estate consultant who is familiar with the terrain to pick out the fine details on your behalf. The outcome of your activities in this step can even place you in a better position to review your offer and negotiate more favorable terms for the purchase.
2. PROFESSIONAL HOME INSPECTION – Are you really getting what you see?
This is an offshoot of cadastral due diligence. It involves an onsite inspection of a property’s condition and structure by qualified professionals like Civil Engineers, Structural Engineers or Building Engineers. You need a thorough assessment to ensure the construction was done to specification in the building plans, that the land registry documents and title deeds correspond accurately with each other to give a true representation of the plot and property.
Basically, separate the fancy physical look from what’s on paper. Is this building durable in the long term?
3. POTENTIAL FUTURE VALUATION- Can I make money from this property in the future?
This bit is encouraged on the basis of planning ahead using the market realities. Should you decide to sell in the future, how valuable will this property be? For example, if you were to put up a 3-bedroom flat for sale in Lekki, what factors now influence the amount of work you need to do to get the property up to standard and if losses arise, are there options to create a better deal for yourself?
You need to determine your holding period and consider various trends related to it that will affect future pricing.
As always, remember to enlist the help of professionals when purchasing a property. At July 8ight Properties, we have premium properties for sale in Lagos and other parts of the country. We can help you easily secure the type of home you want in any of our prime locations. Reach out to us on 08133662358 to get started.