Do Your Homework Before You Write That Check
Due diligence is where real estate deals are made or lost. The exciting part is finding the property. The important part is verifying that the property is actually a good investment before you commit your money. We have seen investors skip steps to close faster and regret it every single time.
Here is the checklist we recommend to every investor we work with in Central Florida.
1. Title Search and Title Insurance
Before anything else, make sure the property has a clean title. A title search reveals:
- Outstanding liens (mortgage, tax, contractor, or HOA liens)
- Ownership disputes or unresolved probate issues
- Easements that could affect your plans for the property
- Code enforcement liens from the city or county
Title insurance protects you if something was missed. It is a one-time cost and it is worth it.
2. Full Home Inspection
Hire a licensed home inspector to go through the property top to bottom. This is not the time to cut corners to save $400. A good inspection covers:
- Roof condition and estimated remaining life
- Foundation and structural integrity
- Electrical system (panel, wiring type, safety concerns)
- Plumbing system (pipe material, water heater, fixtures)
- HVAC condition and age
- Windows and doors
- Moisture and mold indicators
- Exterior drainage and grading
If the inspector flags anything structural, get a structural engineer involved before you proceed.
3. Termite Inspection
This is separate from the general home inspection and it is not optional in Florida. Subterranean termites are a constant threat in Central Florida. A WDO (wood-destroying organism) report costs about $75 to $150 and tells you if there is active or past termite activity and what damage exists.
4. Permit History Check
Pull the permit records from the county. This tells you:
- What work has been done to the property with proper permits
- Whether any permits were pulled but never closed (meaning the work was never inspected)
- Whether there are obvious additions or modifications that were done without permits
Unpermitted work is a liability. It can affect your insurance, your resale value, and your ability to get a certificate of occupancy if you do future work.
5. Insurance Quote
Get an insurance quote before you close. Florida property insurance has gotten expensive and complicated in recent years. Some properties, especially older ones with original roofs, can be very difficult or costly to insure.
Factors that affect your premium:
- Roof age and material
- Distance from the coast
- Flood zone status
- Hurricane protection features (or lack thereof)
- Claims history on the property
If the insurance cost is significantly higher than you budgeted, it changes your ROI calculation.
6. Comparable Sales Analysis
Know what similar properties in the area are selling for, both as-is and after renovation. Your comps should be:
- Within a half-mile to one-mile radius of your property
- Similar in size, bed/bath count, and lot size
- Sold within the last 3 to 6 months
- In similar condition (compare renovated comps for your ARV and as-is comps for your purchase price)
7. Renovation Cost Estimate
Get a real estimate from a licensed contractor before you close. Not a guess, not a number from an online calculator, and not what your buddy thinks it will cost. Walk the property with your contractor and get an itemized estimate that covers:
- Demolition and cleanup
- Structural repairs if needed
- Roof work
- Plumbing and electrical updates
- Kitchen and bathroom renovations
- Flooring, paint, and finishes
- Exterior work and landscaping
- Permit costs
Build a 15 to 20% contingency on top of that estimate.
8. Holding Cost Calculation
Every month you own the property costs money. Calculate your monthly holding costs:
- Mortgage or financing payment
- Property taxes (prorated monthly)
- Insurance
- Utilities
- HOA fees if applicable
- Property management if applicable
- Lawn care and maintenance
Multiply that monthly cost by your expected hold time plus 2 extra months as a buffer.
9. ROI Projection
Now put it all together:
Total Investment = Purchase Price + Closing Costs + Renovation Costs + Holding Costs
Expected Return = After Repair Value (ARV) minus Total Investment minus Selling Costs (realtor commissions, closing costs, etc.)
If your projected profit margin is below 15%, the deal is thin. One unexpected expense or a longer-than-planned hold time can erase your profit entirely.
10. Zoning and Land Use Verification
Confirm the property's zoning and what you are allowed to do with it. This matters if you plan to:
- Convert to a rental property
- Add an ADU or guest house
- Operate a short-term rental
- Subdivide or develop the lot
Don't Skip Steps
Every item on this list exists because we have seen investors lose money by not doing it. Due diligence is not the exciting part of real estate investing, but it is the part that protects you.
J&N StructureWorks provides detailed renovation estimates and property assessments for investors across the Central Florida area. If you need a contractor's eyes on a property before you close, reach out to us.