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Knowledge is Power! Due diligence is a process of scrutinizing every aspect of a transaction. In the case of a real estate transaction, it involves a process of knowing every aspect of the property that you are planning to purchase. Although each type of buyer requires different criteria on his checklist, the bottom line remains the same - knowledge is power! The more you can find out about what you are purchasing, the more successful your venture will be. "An investment in knowledge pays the best interest." Here are a few tips/questions to be addressed:
Don't be afraid to ask questions and obtain clear answers, read documents and last, but not least, do not give any deposit away to the developer if it does not to a trust account of an agreed third party lawyer/notary (only applies within Quebec). When I was involved with the "Loft boutique Québec" project back in 2007, I overlooked a clause that dearly cost me... The deposit was given to a lawyer in a trust account, however, the offer to purchase contained a clause that later caused havoc: the deposit was to be released to the developer upon mortgage approval... the wording was so subtle that none of us paid attention to it. We unfortunately discovered that subtle line in the contract when the project turned sour on me... Turned out that the project was never financed, the developer went over budget and spent our money... We are still, as of today, trying to recover the deposit amount... Thankfully, we are confident that we shall recover our deposit upon the developer's sale of the building, which should take place within the next month. Fortunately, I learned from my past mistakes and today, I can never finely scrutinize every aspect of a transaction enough, and... an overdose of due diligence may drive the vendors crazy, but better be safe than sorry. If the vendor does not want to cooperate, I just choose another one who cooperates transparently... There is no lack of projects on the market, and I never look back once the project is turned down. My due diligence is a beacon; it tells me when I am better off moving to another project if the one offered does not meet my prerequisites, so next... Our latest project in St. John, New Burnswick, for instance, a third party fiduciary in Montreal, not related to the vendor, was cherry-picked. I contacted the chamber of notaries in Montreal (*), which is 'THE' institution (http://www.cdnq.org/) in charge of regulating notaries under very strict rules. The notary was hand-picked and carefully selected. His mandatge is to hold the deposits until closing, ensuring that none of the funds will be released to the vendor until the closing lawyer instructs our chosen ficuciary that the transaction is ready to close. To avoid being faced with any similar misfortune as described above, I strongly recommend to ensure that the third party lawyer/notary in charge of the deposit is reputable and trustworthy, and that your deposit is not to be released to the vendor prior to closing!... This last step should save you from unforeseen surprises in the future. By deepening the knowledge on what may go wrong with "in trust accounts", your fear level will decrease, thus increasing the clarity of your decision proces and the success of your transaction. Overall, real estate investing is a rewarding one, if you have made a decision based on specific due diligence facts - not emotions. If all meets your requirements, your new a acquisition will be one that you will enjoy for many years to come as a great cash flow producing stream of income! Make your investment an asset, not a liability; make it work for you by gaining more knowledge and, therefore, power over your financial destiny!
PI Global Properties President (*) A notary is equivalent to a lawyer. In Quebec, because we operate under napoleon rules, all transactions are done via a notary versus a lawyer in other provinces.
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