--- title: What is Real Estate Due Diligence? description: Only after a thorough real estate due diligence review can you and your client understand the risks specific to a property. image: https://blog.factright.com/hubfs/Blog%20Images/AdobeStock_103515753.jpeg --- behance bloglovin dribbble email facebook flickr github gplus instagram linkedin medium periscope phone pinterest rss snapchat stumbleupon tumblr twitter vimeo xing youtube - [Facebook](https://www.facebook.com/FactRightLLC/) - [Twitter](https://twitter.com/factright) - [Linkedin](http://www.linkedin.com/company/395017?trk=tyah) - [Phone](tel:866-357-7779) [Report Center Login >](http://www.factrightreports.com/Account/Login) - [Home](http://www.factright.com/) - [ABOUT US](http://www.factright.com/team/) - Financial Advisory Firms - [FR Risk Management](http://www.factright.com/fr-risk-management/) - [Report Center](https://www.factright.com/resources/report-center/) - [Product Coverage](https://www.factright.com/resources/list-of-coverage/) - Product Sponsors - [Due Diligence Reporting](http://www.factright.com/due-diligence-reporting/) - [Preparing for FactRight Diligence](https://www.factright.com/preparing-for-factright-diligence/) - [Resources](https://www.factright.com/resources/) - [Report Center](https://www.factright.com/resources/report-center/) - [FactRight Webinars](https://www.factright.com/resources/webinars/) - [FAQs](https://www.factright.com/resources/faqs/) - [Events](https://www.factright.com/events/) - [Weekly Updates](https://www.factright.com/weekly-updates/) - [FactRight Blog](https://blog.factright.com/) - [Contact](http://www.factright.com/contact/) # What is Real Estate Due Diligence? July 21, 2017 by [FactRight](https://blog.factright.com/author/factright) ![Real Estate Due Diligence](https://blog.factright.com/hs-fs/hubfs/Blog%20Images/AdobeStock_103515753.jpeg?width=320&name=AdobeStock_103515753.jpeg "Real Estate Due Diligence")Many investors approach the real estate due diligence process less seriously than they should. Even sophisticated investors can be guilty of doing this. Broker dealers and registered investment advisors can help protect impulsive (or know-it-all) clients from themselves by becoming more informed about the importance of doing due diligence before investing in real estate ventures.  Broker dealers and RIAs should understand why doing due diligence is absolutely necessary before investing in real estate. You should also understand why not undertaking a thorough due diligence analysis is akin to malpractice.  You may need to protect your clients, who often approach due diligence as something to check off the list rather than as a process that can protect their investments. It’s your job to help keep them from making a big financial mistake by arming them with as much information as possible when making investment recommendations. Broker dealers and RIAs should not blindly accept the sponsor’s numbers and analyses without question. Independent assessment and verification of material sponsor representations form the core of real estate due diligence. Clearly, the process should go [beyond the numbers](https://blog.factright.com/alternative-investment-due-diligence-beyond-the-numbers). ## Why is Due Diligence Important? Investors must [mitigate financial risk](https://blog.factright.com/understanding-and-improving-your-risk-management-process) to themselves by looking not only at the numbers but by understanding at the broader market, legal, regulatory, and operating environment in which the property exists. Every piece of real estate is unique. Thus, broker dealers and RIAs recommending a real estate investment product will need to review various types of information, and ask questions related to things ranging from lease renewal options to zoning compliance, in order to grasp the particular investment opportunity.   Only after a thorough due diligence review can you and your client understand the risks specific to the property and whether the offering terms comport with the investor’s risk/return profile and investment objectives.   ## What's in a FactRight Due Diligence Report? FactRight's targeted, third party due diligence helps you identify and mitigate risks presented by a real estate offering. Our due diligence reports on private real estate offerings may include review and analysis of:  - Market and demographics data to predict future demand for property  - Independent site inspection to verify key sponsor representations about the property and neighborhood  - Local broker interviews to shed light on market conditions  - Major property leases to verify key terms that support projections, and identify risk related to termination, non-renewal, and maintenance obligations   - Rent roll to analyze the duration of tenant leases  - Credit ratings and financial information to assess creditworthiness of major tenants  - Recent valuations to substantiate purchase price  - Property condition assessments to determine capital needs, and assess sponsor’s provision of reserve funds for future expenditures   - Title insurance and surveys to verify sufficient coverage and identify material encumbrances, restrictions, and encroachments   - Environmental assessments to identify any material environmental issues  - Zoning regulations/land use classifications and entitlements to determine property compliance related to current use and/or intended development plans  - Sponsor financial projections, to assess reasonableness of assumptions, and model different performance scenarios through sensitivity analysis   - Relevant public filings with the SEC   FactRight prepares comprehensive and unbiased reviews of sponsors and projects. We provide support to advisors and investors seeking to verify identify and mitigate risk related to the offering. A third party due diligence review is an essential part of any investment process. Don’t rush into any investment without performing a complete due diligence investigation.   [![New Call-to-action](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/2777169/04a19545-0390-425c-a9ce-377ac4378493.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/2777169/04a19545-0390-425c-a9ce-377ac4378493) [FactRight Takes Salt Lake City](https://blog.factright.com/factright-takes-salt-lake-city) [Navigating the Cap Rate Landscape: How Real Estate Cap Rates Relate to Real Interest Rates](https://blog.factright.com/navigating-the-cap-rate-landscape) [FINRA Regulatory Notice 23-08: Building on Regulatory Notice 10-22 to Develop More Robust Due Diligence of Private Placement Offerings](https://blog.factright.com/finra-regulatory-notice-23-08) [Not All Units Are Created Equal in Broker-Dealer and RIA-Distributed Investment Programs](https://blog.factright.com/not-all-units-created-equal) Filed Under: [Due Diligence](https://blog.factright.com/topic/due-diligence) ### Get Blog Notifications ### categories - [Due Diligence (85)](https://blog.factright.com/topic/due-diligence) - [Best Business Practices (39)](https://blog.factright.com/topic/best-business-practices) - [Alternative Investments (32)](https://blog.factright.com/topic/alternative-investments) - [Real Estate (29)](https://blog.factright.com/topic/real-estate) - [About FactRight (27)](https://blog.factright.com/topic/about-factright) - [REITs (27)](https://blog.factright.com/topic/reits) - [Best Practices (24)](https://blog.factright.com/topic/best-practices) ### Archives - [April 2026 (1)](https://blog.factright.com/archive/2026/04) - [March 2026 (1)](https://blog.factright.com/archive/2026/03) - [January 2026 (1)](https://blog.factright.com/archive/2026/01) - [September 2025 (1)](https://blog.factright.com/archive/2025/09) - [March 2025 (1)](https://blog.factright.com/archive/2025/03) - [October 2024 (1)](https://blog.factright.com/archive/2024/10) - [May 2024 (1)](https://blog.factright.com/archive/2024/05) - [March 2024 (1)](https://blog.factright.com/archive/2024/03) - [November 2023 (1)](https://blog.factright.com/archive/2023/11) - [September 2023 (1)](https://blog.factright.com/archive/2023/09) - [August 2023 (1)](https://blog.factright.com/archive/2023/08) - [June 2023 (2)](https://blog.factright.com/archive/2023/06) - [March 2023 (1)](https://blog.factright.com/archive/2023/03) - [February 2023 (1)](https://blog.factright.com/archive/2023/02) - [January 2023 (1)](https://blog.factright.com/archive/2023/01) - [December 2022 (1)](https://blog.factright.com/archive/2022/12) - [November 2022 (1)](https://blog.factright.com/archive/2022/11) - [October 2022 (1)](https://blog.factright.com/archive/2022/10) - [September 2022 (1)](https://blog.factright.com/archive/2022/09) - [August 2022 (1)](https://blog.factright.com/archive/2022/08) - [July 2022 (2)](https://blog.factright.com/archive/2022/07) - [June 2022 (1)](https://blog.factright.com/archive/2022/06) - [May 2022 (1)](https://blog.factright.com/archive/2022/05) - [April 2022 (2)](https://blog.factright.com/archive/2022/04) - [March 2022 (2)](https://blog.factright.com/archive/2022/03) - [February 2022 (2)](https://blog.factright.com/archive/2022/02) - [December 2021 (2)](https://blog.factright.com/archive/2021/12) - [November 2021 (1)](https://blog.factright.com/archive/2021/11) - [October 2021 (1)](https://blog.factright.com/archive/2021/10) - [September 2021 (1)](https://blog.factright.com/archive/2021/09) #### Contact FactRight, LLC 7500 Flying Cloud Drive, Suite 755 Eden Prairie, MN 55344 Call Today: (612) 284-6150 [http://www.factright.com/](http://www.factright.com/)[info@factright.com](mailto:info@factright.com%20target=)   #### FactRight Report Center Independent risk assessment and third party due diligence reports. **[Log In >](http://www.factrightreports.com/Account/Login)** #### Looking for Something? - [Facebook](https://www.facebook.com/FactRightLLC/) - [Twitter](https://twitter.com/factright) - [Linkedin](http://www.linkedin.com/company/395017?trk=tyah) - [Phone](tel:866-357-7779) Copyright © 2019 · [FactRight, LLC](http://factright.suiportal.com/) · [DISCLAIMER](http://www.factright.com/disclaimer/)