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Due Diligence

One of the fundamental aspects of IPD Property Group is to offer products that have been through our due diligence procedures, that they provide returns to investors and are operational.

 
 
 

IPD's Due Diligence Checklist

IPD Property Group outline as follows key aspects of the due diligence procedure. IPD are able to advise and assist in the fact identification process including but not limited to the financial and tax implications that will impact on the investment. Please note that in all due diligence processes some independent legal advice may be required.

Marketing and Value

Factors such as location, the properties view, the facilities provided near the property and the proximity to such things as restaurants, city center services, beaches for tourism benefits and any other local attractions can affect the rental potential and the resale value.

The Location

Emerging or established - both types of market have their advantages and disadvantages, and investors while trying to spot the next big boom location, should not dismiss the locations where property might simply be undervalued in a tried and tested market and therefore offering great investment potential. IPD can assist with past, present and future trends to provide the investor and good concept of potential.

Price Point and Ultimate Value

Net profit will be affected by the initial price paid for the property, the returns available and over what period, and the ultimate sales price. In an ideal world an investor will wish to purchase at the lowest possible price point, have high net rental returns and sell above the purchase prices. IPD can provide comparisons with other properties and developments, down the the square meter, all offered within the same area as we have a wide range of products available in the same locations.

Quick Sales

How quickly will the investor be able to sell the asset depends on a range of factors not limited to but includes the domestic market activity and strength as well as foreign investment interest.

Rental Income

The average yield over a set period is the key factor in any solid investment. A slow steady domestic market investment over 12 months may bring in no more return than a tourism investment with a shorter 6 month window. All markets are subject to fluctuations and commercial is no different from residential in terms of its exposure to both the upside and downside.

The Developer and The Development

IPD Property Group partner with highly respected developers located around the globe. We look at the track record of delivery and the reputation the developer holds. We have built firm relationships with key people in important decision making positions that enable investors to make better choices. Independent legal advice is recommended when considering any real estate purchase to ensure contracts are in order.

 

Land Title Ownership

The land registry office can confirm that the developer holds title to the land and can then legally transfer title to the purchaser when the building is complete. A legal representative such as a local lawyer will be able to check and advise as to legalities.

Bank Guarantees or Escrow

A bank guarantee is a guarantee made by a bank on behalf of the developer should it fail to deliver the building. Escrow is where the developer places any deposits on the property made by investors into a bank account which means the investor will be refunded should the development not proceed. Some countries do not legally require bank guarantees but developers are able to offer similar security backed by insurance companies known as “completion insurance”. IPD will advise on what type of assurance is in place.

Building License In Place

A building license needs to be in place and will outline the type of project, location, the number of units and types, the overall build size of the project and all of the specific details. Advise is to proceed with a purchase only if the license is already in place.

Completion of the Property

Once the unit or units are completed an investor will need to sign a Private Purchase Agreement with the developer. Some investors will use a “buy to flip” strategy which involves making the initial deposit and then selling the option prior to the build completion. A lawyer will be able to outline the specific procedures and rights of the investor.

Build Quality

What guarantees that are in place and the length of time for which these guarantees exist in relation to the build quality - does the build match the list of specifications as presented to the buyer. A good developer will ensure high quality as it's their reputations they are ensuring.

Property Delivery Time Line

It is normal to expect a delivery time line if an investor is purchasing off-plan. A lawyer can advise as to penalties could be available for late delivery. A Bank guarantee and completion insurance policies might cover costs as relates to delays. Seek advice.


Financial Issues

What are the Tax implications, how can I mortgage the property, what are the closing costs, what are staged payments - this and more questions answered.

Obtaining a Mortgage

Considering the option of financing the investment must be a careful decision based on the rental return, the overall purchase and sales price and the type of lender.

Interest Rates

A rise or fall in interest rates will affect any financing of the investment. Also a rise or fall in rates in the specific country where the investment resides could affect the eventual sales price of the property due to market changes. No one can for see where rates will alter but trends can be assessed.

 
 
 

Property Taxes and Personal Liability Tax

Transfer taxes and stamp duties as well as most other taxes should be outlined in advance of the signing of any contract. Investors should also be aware of tax implications when it comes to selling the property. Capital gains taxes apply in most countries although they differ from one to the other. Dual taxation agreements between countries also may exist which means Tax can be withheld at source and claimed locally.

Staged Payments

IPD Property Group will provide payment plans to Investors in order they can be aware of forthcoming payments. We also work to provide the optimum payment plan for the investor to assist the payment process run smoothly.

The IPD Process

IPD go to great lengths to provide detailed information which is essential for investors to understand. We outline rental potential, market history and current activity levels and price fluctuations.

We provide a track record of the developer or builder with an overview of past history.

We look at or advise on :

Bank guarantees
Building licenses
Land Titles
Transfer of Private Purchase Contract prior to build completion
All tax considerations both prior to purchase and after sale
Finance options and rates
Build guarantees

IPD will advise each client to use their own lawyer or solicitor when purchasing a property, even though we as part of our service try to minimize the risks associated with a real estate investment.

 
 
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