A worthy subject of focus for this month’s magazine - due diligence. This borders with one of the key skillsets to be a successful property developer or investor - attention to detail. If you are always up in the clouds, in the strategic helicopter - and it is a place I love to be, blue sky thinking, looking at new opportunities or new markets - then nothing will get done. A great CEO of an organisation (with the emphasis on “executive” - I don’t mean a figurehead founder who has been there for 20+ years), will spend 20% of their time on strategic thinking and 80% executing, and ensuring that their key players are getting things done.
Due diligence is woefully misunderstood, and under taught. Why? Well, firstly, it isn’t very sexy. Sorry, DD, but it is true. If you are one of the property educators who focuses on sales, sales, and more sales - courses on due diligence are not going to fill the room, or the zoom. The buyers want to hear that it is easy, it is fast, it is all there waiting for you to take it - and due diligence is the polar opposite of that. I want to tell you a bit about what good due diligence looks like.
I have so many examples I can pick from, on a weekly basis. The most recent one in mind as I pen this article is a recent delegate who has joined our Boardroom Club. The delegate is looking to deploy some funds, as he currently has an excess, and is entering into a JV with first charge security on his funds. That’s a good start - because many do not even get the right security or understand what security they should be taking for the rate they are being promised. However, first charge in and of itself is not bulletproof - because we haven’t even started to discuss loan to value. Nevertheless - how did I approach this situation, and help to solve the problem?
Firstly, due diligence on the JV partner. How well did they know them? Would they leave them to babysit their children? (A great question to ask). Do they have the same values? Some will read that and think “why would you care about that?”, and that’s an easy question to answer. Because business is hard, and when the chips are down, and someone has to make a hard decision, will they make it with integrity, and put their word and the business first - or will they pull the ripcord and leave carnage behind them?
After the “fit”, how about their online presence and the claims that they make? Are they indeed an “expert” in XYZ, as they claim to be on social media? What does companies house beta say (be warned, it is a great tool but nowhere near the holy grail and often up to 21 months out of date)?
