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Read Transcript for “How to NEVER Do Due Diligence”
“How to NEVER Do Due Diligence”
Joe: Hey, it’s Joe Crump. Doing a series on outrageous claims I’ve made ever since I started teaching real estate investing about real estate investing.
Joe: This next one is how to never do due diligence on a property. You know, so often I see people spend hours and hours. They’ll find a property, or let’s say they find a vacant property so they go and they do a skip trace and they find the owner of that property and then they try to track down that owner and then they talk to the owner and usually right off the bat the find out that that’s not a deal that they can get because the owner doesn’t want to work with them.
Joe: But let’s say they do get to the owner and the owner does say yes. Now they’re going to buy this property for cash so they will need to go inside, or they’re going to get a new loan on it, so they’re going to go on there and they’re going to do an inspection on the property and they’re going to check the title and they’re going to get title insurance and they’re going to do all those things before they close the deal. And then they finally close the deal. If something comes up that sidetracks that, or derails the process, then that deal is done and they’ve put in potentially, you know, two, four, ten hours, twenty hours’ worth of work on that one deal and never got it to close because something went wrong.
Joe: It went wrong because they did due diligence and they found out, hey, I don’t want to get hurt. I don’t have any money, I don’t want to have my money on the line and get hurt. But the reason we don’t have to do due diligence is because we don’t have our money on the line. We don’t have our credit on the line. A lot of times, we’re just flipping these deals. So, we’re going to make the seller and the buyer responsible for the deal that they’re buying or selling.
Joe: So if the seller tells us the house is in good condition, doesn’t need any repairs we can say, “This is what the seller’s told us,” to the new buyer, “but it’s important that you go in there and do your own due diligence, make sure the property is in good shape. If there’s a problem, then you need to let us know,” so that before we close the deal, they’re good to go.
Joe: So we put the responsibility on the shoulders of the people that we’re flipping the deal with rather than having to take it on ourselves. Now, if we were going to keep that property as part of our portfolio, we want to do due diligence. I believe that I like to go to that property so that when I get a property that I want to keep, most of the time, and I haven’t done this all the time, but most of the time I try to go see that property or that neighborhood or at the very least to get somebody to take some videotape and cover the area and talk about the area, somebody who knows the area for me. And you can do that.
Joe: Or if you build an infrastructure in a place you can have somebody who’s looking at your subject to deals who’s in inspector who understands the condition of properties and is going to find problems before they arise and that way you’ll know what to expect if you keep that property. So you don’t have to spend a lot of time doing due diligence. Make the offer and make the offer contingent. So it’s assignable, always, and it’s always contingent. And it’s either contingent upon you filling the property with a tenant, you know, if you’re doing lease option deals, or it’s contingent upon approval by your investor.
Joe: And your investor can be your wife or your mom or your husband or your friend or basically, you. You know, it’s basically saying, I’ll take it unless I change my mind. Of course, you don’t want to say it that way, because that’s a little bit insulting, but, that’s kind of the position that we’re taking. We want to be able to walk away from a deal anytime we want to before it closes and that’s why we don’t need to do due diligence on this. And it saves us a huge amount of time.
Joe: Okay. Hope that helps.