Due Dilligence

I am just starting to actually look for my first deal and need a little help. I drove around my neighborhood and found several possibilities I would like to research.

What I Found Out

Comps (mother in law is realtor)
Assessors office shows parcel#/lot#, owner mailiing address, link to taxes paid, tax lien info, link to the deed history, year built, sf of lot/house

What I need to know
How do you find out how much a person owes on the house? Is there somewhere to look it up or do you have to find out what they paid (on the original deed?) and then guestimate what they owe today?

What else should I be looking at as far as determining it’s worthiness as a deal? (I haven’t been inside any of them so I can only estimate outside repairs. Just trying to see which ones I should even go further with)


As far as finding out information about how much an owner owes, I use www.realquest.com It doesn’t tell the current balance but it does show when the loan was taken out and what the terms were. It’s easy to guess how much they owe. The problem is that the information is available on most but not all properties.

Determining deals is all based on your exit strategy. For example if you plan to wholesale it, you need to be looking at 70% ARV - repair cost - your wholesale fee = your max offer.

have you read at all about real estate investing?

have you done any mental preparation at all?

do you have any background in business/real estate?

are you familiar with any kind of sophisticated investment strategies?

have you or anyone you know done this before?

tcwood, thank you! I think I jumped the gun a little bit there though. My mother in law was able to provide me the mortgage history including down payments. Reading the information was really quite fun and really gave a good picture of the current owners life (for example, one couple divorced, she got the house, then it has been rented for at least a year. she tried to sell it for 240 but after 3 mos, no go. Alll from the mortgage/deed history… I love it!) However, I will definitely keep the site in mind for the times my MIL is not available. I also should have been more through in my history and in what I plan to do. I’ll do that now in my answer to tmcg. Thanks a bunch!

“have you read at all about real estate investing?”
Oh yes. A few years ago I thoroughly researched buying land, putting a modular home on it (not manufactured) and selling at retail. The money was definitely there to be made, unfortunately, my finances were not ready. I then looked into rentals but only knew of conventional financing with 10% down plus closing costs etc. I gave up until I recently learned about HMLs/seller financing/other creative financing. It seemed possible and the RE bug bit me again. I have read 10-15 books on RE investing, have read all through this web site and another one, and attended my first reiclub meeting on Monday. I will be going to my first cashflow game on tuesday and am debating signing up for this saturdays fix and flip seminar hosted by my local reiclub.

“have you done any mental preparation at all?”
Absolutely. I have an idea of the physical work this will entail. Since we moved into our home 1.5 years ago we have completely renovated the kitchen (removed countertops and created new tiled ones, new sink, fixtures, stripped/repainted cabinets, added microwave over stove, installed recessed lighting) put in new vanity/lighting in extra bath, painted every interior surface, created a built in entertainment center for our flat screen (and put in a built in desk in the room we pushed the wall into, and are currently installing laminate wood floor. I’m sure theres more but you get the picture. And no, I wouldn’t do half that on a flipper. Other than knowing the work involved, I am ready, willing and already working on changing the things about myself I need to change to be the person I need to be to succeed at this.

“do you have any background in business/real estate?”
I owned my own successful business for 4 years. The market changed and I didn’t want to go where it was going so I sold. I sold at just the right time too. The guy I sold my business to went bankrupt. No backgound in RE other than all the research I did when I was going to get into it a few years ago, and I have been following the market.

“are you familiar with any kind of sophisticated investment strategies?”
I have read about several creative ways to buy property, as well as 1031 exchanges, and converting your house to a rental so it can qualify for that. I am also going to look into creating/using a self directed IRA for investing in RE (have no idea what types of RE investments are allowed) I like the idea of one LLC for flippers and one for rentals. Basically, I have read about several things but haven’t done any yet. You probably don’t consider any of those sophisticated. I suppose the sophistication will come as I learn.

My strategy is to get into fixing/flipping SFR (least fixup possible for the first one). I will be dong some of the work myself (paint, bathroom vanities, lighting, kitchen fixtures) but will be hiring out flooring… uggh!! and probably drywall (too time consuming). I have some connections already. I likely will be using Hard money and will have to keep it at 70% (less fix ups) That only leaves me needing to pay points (or pay at the end if the loan program allows) and paying for holding costs while I fix/sell (and of course realtor fees and capital gains… and I still need to know if if the gain is treated as ordinary income on schedule c and if I will be subject to SE tax?). Goal for year one is 2 properties. Maybe its low, maybe high but it is a good goal for me. During year 2, goal is 6 fix/flips and my first rental. Year 3 is 10 fix/flips, 2 more rentals, and get into tax liens.

“have you or anyone you know done this before?”
Me, never. Known anyone who did it for a career? No. I guess what really got me started thinking was the guy across from my old workplace with all the toys (multiple offroad bikes, quads, a hummer, expensive motorhome, boats, etc) They We talked to the brother of the guy making all the money. The brother was a bird dog for his brother, and also in charge of taking care of the toys/prepping them. The brother says the money man got started with one rental house and just kept moving up to bigger things. That was real inspiring to me. Also inspiring was a couple friends making big money on the sale of their personal homes (was BEFORE the prices skyrocketed)

I guess what I was needing to know is if I need to know any further information about the house itself when researching it (other than what the owner owes and what the fix up costs will be, and if there are any liens other than the mortgage(s)) I am looking in houses in my neighborhood and already know the comps and the area. Of course if it is somewhere else, I will need to know of any proposed changes in the area that could affect the value of the house.

Thanks for your input. I welcome any more questions/suggestions. I want to make the fewest mistakes possible.


how are things coming along?

Way slower than I want.

I had to put everything on hold for the past week to finish the flooring in our own house. It’s been a project since late October! It really had to get done to keep the peace at home. And let me restate, I will be hiring out flooring in the flippers!

I got a bit bogged down feeling like I was just getting nowhere (even before I finished the floors) However, I think I have pinpointed the things that are keeping me from looking for that first deal. Now I feel like I can get those done and then I will feel confident to proceed. I don’t mind risks but I want them to be calculated ones.

Thanks for checking back on me! Happy New Years!

Exciting, Make sure you verify that the taxes have been paid on the properties you are looking at…I got snagged on one of those. HOA dues, paid, no city ordinance type fines hanging out (like for mowing the yard or clearing debris, that sort of thing).

Like you, I try to calculate the ‘surprises’ and keep them at a minimum by doing as much due diligence as I can. I think we learn so much as we go that being totally prepared and covered doesn’t happen 100% of the time.

This is a new year, pick up your goals…they sound very doable and reasonable.

Keep smiling!

nothing wrong with things being “slow”.

that’s better than being overly motivated and getting into something totally silly and costly with 0 or negative returns.

basic rehab plan:

buy low

sell high

keep costs down

find out how to do these things, prepare for taxation (CPA), set up business entity and have an attorney(s) to rep your business.

start small and build up.

there’s a lot that goes into all this stuff - but when you’re learning - remember you didn’t learn to walk before you learned to crawl.

i didn’t become a Masters level counselor overnight. it took me 8 years to be able to conduct (what i consider) a quality counseling session - and i’m still improving - life’s a journey.

lawyers don’t become lawyers overnight.

doctors, cab drivers, cops, fireman, clerks, astronauts, mom’s, dad’s, teachers, etc. etc. etc…

no one learns overnight - it’s a process.

one qualifier if i may - my college lacrosse coach said:

“Who believes in the saying, ‘Practice makes perfect’?”

we dummies all raised our hands…

he said,



learn it as perfect as you can, and practice that over and over - then it becomes an unconscious act - like breathing.

Bruce Lee said:

"Be like water making its way through cracks. Do not be assertive, but adjust to the object, and you shall find a way round or through it. If nothing within you stays rigid, outward things will disclose themselves. "


Love your quotes and your thought provoking reply.