On today’s show Patrick asks “How important is making site visits prior to purchasing a property?”
The simple answer is “It depends”. Certainly, you need to get a lot of information about a property before you buy. Some of it requires a site visit. That doesn’t mean it has to be you to go to the property. But you do need the information one way or another.
When I perform due diligence on a property, I’m looking for a few important things.
I want to know what is around it. If the value of a property is determined by location location location, then you want to learn as much as you can about the area surrounding the property. You need to evaluate the context of the property. You can have 1000 pictures of the subject property, but still know nothing about the value of the property because you haven’t seen what is around it.
I want to see the amenities in the area. What is the traffic like? How easy is it to get on the freeway from the subject property? How close is good quality shopping? If the closest Whole Foods is 20 miles away, then that might color your decision.
I want to look at the subject property and properties immediately surrounding the subject property for evidence of erosion or standing water.
I want to look at the zoning map and the municipal plan overlay. The properties next to me might be zoned according to their current use, but if the city has designated them for another use, I would want to know that. Is the city going to widen a major road and take a 20 foot or 40 foot strip from my property at some point in the future? You might think I’m exaggerating. But I’m not. I’m currently building two project where the city has taken and additional 40 feet of land from all the properties on the street and added it to the road allowance. This will enable the city to widen the road when it feels the need arises. Instead of having 851 feet of land depth from the road, I have 811 feet of depth. It definitely has an impact on the project.
I’m going to want the environmental phase 1 survey. That survey will require a site visit. But it doesn’t have to be me. The site visit will be performed by the consultant who performs the survey.
If I don’t feel like getting on an airplane, and visiting a property, then I’ll find somebody local who is willing to perform a live video conference walking tour of the property and the area. I record the video, and by being connected to the live video, I’m able to direct the camera to anything I want to take a deeper look at.
So far, everything I’ve talked about is outside the building. If the property has a structure on it, you will definitely want to get a detailed view of key items. What is the finished product that you have in mind? How easy will it be to transform the existing structure into that new finished product?
If the property has a basement and you wan to develop the basement, you need to take a detailed look at the supporting columns, the vertical clearances, and the routing of utilities to determine the scope of work. You will want to know the capacity of the electrical panel and find out if there is expansion room for what you want to accomplish. Adding a few breakers is a very manageable scope. Replacing the entire electrical main wiring and replacing the panel with a larger one might not be. Again, you don’t need to visit the property yourself. But you do need answers to the key questions.
The key is to have clarity on your due diligence checklist. Some items will require documentation. Some will require consultants. Some will require conversations with neighbours, local politicians, people in the planning department at the city.
It all starts with a vision for the finished product, and developing a detailed due diligence checklist before you step away from your desk.
