Real Estate Due Diligence.
In the Real Estate world every square meter counts, so every detail can make the difference between a resounding success and a headache. The property to be developed is a key piece and therefore requires meticulous research and document review is the key; there is no better way to ensure that your investment is solid and smooth.
A tool to achieve this is precisely the Due Diligence, which consists of obtaining and analyzing information about the property and other factors involved. We present you a guide with the general information and factors that you should review before acquiring / receiving in contribution a property.
1. Legal analysis - ownership. The purpose of this section is to determine if the property complies with the applicable regulations. Among the documents and points to review are:
A. Title Deed.
B. Cadastral History.
C. Certificate of Freedom of Liens.
D. Description of the property, that coincides the registered with the physical reality.
E. Judicial and neighborhood conflicts that directly or indirectly affect the property.
2. Administrative and urban analysis. The analysis, roughly speaking, must determine the urban potential of the property and the use of the land it has. That is to say, it is necessary to identify the uses to which the Property can have access and the dimension of the project that could be executed. To do this, it should be clarified:
A. Classification of land use and construction control standards.
B. Make sure you know all the restrictions and conditions that may affect your project.
C. Feasibility of the project in terms of current and applicable urban regulations.
3. Physical Conditions of the Land. Before acquiring the land, it is important to carry out a physical inspection to evaluate its condition and its potential for development. It is necessary to be clear:
A. State of the land: Verify the morphological conditions and identify any issues such as caves, flooding or landslides.
B. Topography and access: Ensure that the topography is suitable for development and that there is road access to the site.
4. Financial Analysis of the project - Before committing to the purchase, it is crucial to perform a detailed financial analysis to ensure that the project is viable and profitable. The minimum essential elements it should contain are:
A. Project budget.
B. Sources of financing.
C. Profitability projections.
5. Commercial Analysis of the Project - For this section, among other factors, the following should be analyzed:
A. Market demand.
B. Competition.
C. Market prices.
D. Expected return.
E. Marketing and sales plan.
Developing a real estate project implies an important investment, the execution of a Due Diligence will help you protect your investment and avoid future problems.
There is no single list or standard formula, all properties and real estate developments have their particularities and must be analyzed case by case and with the depth that each one requires. For this, we suggest hiring the advice of professionals in each stage of the Due Diligence.
In the Firm we have advised and supported in the execution of the Due Diligence for several real estate projects with Tourist, Commercial, Residential and Mixed Uses in different points of the Mexican Republic.
Contacto us.
Gerardo Torres González [email protected] Luis Andrés Aceves de la Cruz [email protected]