The commercial lending crisis underscores how important due diligence is. Nevertheless, many investors spend little more than the costs of meeting lender due diligence requirements as part of due diligence. Consider that to satisfy the lender we pay $10,000 to $15,000 for property condition, phase I and appraisal. We spend another $3,000 to $10,000 for surveys. Title work runs from $3,500 to $10s of thousands. Legal, background, lien searches, etc. adds 10s of thousands.
Considering these, we should plan to spend $25,000 to $50,000 additional to complete the necessary due diligence to draw out our requirements as investors to minimize risks, maximize value opportunity, and to assure adequate funding. For larger more complex deals this figure could even be greater.
