FAQ: A Due Diligence Primer

How to Do Your Property & Alternative Investment Due Diligence.

One of the key skills for any investor is to understand and then apply the appropriate level of due diligence on any prospective investment. It’s often overlooked for a wide variety of reasons, but doing this one thing correctly and consistently can make all the difference in the world to how successful your investing career will be.

That’s why we’re rolling back the covers and offering our first comprehensive Due Diligence Primer in the familiar form of Frequently Asked Questions. We cover a lot of ground, but jump around the the questions that stand out for you. And remember, we are here to do as much of this work for you as you wish, using our “Deep-Dive” and “Fit-For-Purpose” methods, supported by state-of-the-art tools.

Buckle up and enjoy the ride…

About Investment Due Diligence

Why do i need to do investment due diligence? 

Investment due diligence is an important part of the process of making any investment decision. It helps to ensure that you are making a well-informed decision based on accurate information about the potential risks and rewards of the investment. Investment due diligence can also help to identify any potential issues that may arise from the investment and help you to make an informed decision about whether or not to proceed with the investment.

What does “do your own due diligence” actually mean? 

Do Your Own Due Diligence (DYODD) is an expression used to remind people to take responsibility for their own decisions and to conduct research and look into a situation for themselves before making a decision. It is a reminder to take a proactive approach and seek out additional information that may not be readily available.

What would I expect to gain from thorough due diligence?

Through thorough due diligence, I would hope to gain an in-depth understanding of the company, the industry, and the market in which the company operates. I would also want to gain a clear picture of the company’s financials, its competitive landscape, and the potential risks associated with investing in the company. Additionally, I would hope to gain peace of mind that the company is a good investment and that I am making a sound decision.

What do i need to do to “do my own due diligence”? 

1. Research the company or product thoroughly. Look into their financials, how long they have been operating, any customer reviews, and any news stories related to them. 

2. Talk to experts in the industry or read articles and reviews to get a better understanding of the company or product. 

3. Ask questions and get answers from the company or product’s representatives. Make sure they are able to answer your questions in detail and provide evidence to back up their claims. 

4. Seek out a second opinion if needed. Talk to other experts or customers who have experience with the company or product. 

5. Create a checklist of items to research and investigate. This will help you ensure that you have considered all aspects of the company or product before investing. 

6. Follow up regularly. Don’t be afraid to check in with the company or product’s representatives to make sure everything is still accurate and up-to-date.

What types of due diligence are there ? 

1. Financial Due Diligence: Reviewing financial statements, identifying any potential risks or liabilities, and assessing the target company’s overall financial health. 

2. Legal Due Diligence: Examining all existing contracts, intellectual property, litigation history, and other legal documents. 

3. Operational Due Diligence: Analysing current operations and processes, assessing customer and supplier relationships, and determining potential areas of improvement. 

4. Tax Due Diligence: Reviewing the target company’s tax returns and assessing its potential tax liabilities. 

5. Environmental Due Diligence: Investigating any potential environmental liabilities or risks associated with the target company. 

6. Market/Competitive Due Diligence: Assessing the competitive landscape and analysing potential market opportunities. 

7. HR Due Diligence: Examining the target company’s employees, benefits, and compensation.

What exactly is operational due diligence? 

Operational due diligence is the process of performing an in-depth review of a company’s operations in order to assess its ability to generate returns in the future. It is an important part of the due diligence process, and involves looking at the company’s products and services, operations, personnel, technology, financials, and legal and regulatory compliance.

How much due diligence should i do on a prospective investment? 

The amount of due diligence you should do on a prospective investment depends on the type of investment, the amount of money you are investing, and your comfort level with the risks involved. Generally speaking, it is wise to do as much due diligence as possible. This includes researching the investment, reviewing financial statements, and speaking with professionals who may be familiar with the investment. Additionally, it can be helpful to speak with other investors about their experience with the investment. Finally, it is important to consider your own risk tolerance and make sure that the investment is a good fit for your financial situation.

What is the 80/20 rule as applied to due diligence? 

The 80/20 rule as applied to due diligence states that 80% of the value of any due diligence process can be realised by only spending 20% of the time and energy required to complete the process. This means that by focusing on the most important aspects of due diligence and limiting the amount of time and energy spent on the process, you can still achieve the desired outcome.

What are the most important aspects of due diligence? 

1. Evaluation of Financial Statements: It is important to look at the financial statements of the company to ensure that they are accurate and up-to-date. This includes examining the balance sheet, income statement, and cash flow statements. 

2. Assessment of Legal Documents: Reviewing the legal documents of the company is essential to ensure that there are no potential liabilities or risks. These documents may include contracts, leases, and licenses. 

3. Business Model Analysis: It is important to understand the company’s business model, as well as any future plans for growth and expansion. 

4. Risk Analysis: Risk analysis involves assessing the potential risks associated with the company. This includes reviewing the internal control systems and identifying any potential compliance issues. 

5. Background Checks: Background checks are important when considering a company for investment. This includes checking for any previous legal issues, financial problems, or any other red flags.


6. Customer Checks: It is also important to check the customer base of the company to ensure that the customer base is loyal and that the customer base is growing. 

7. Market Analysis: Analysing the competition in the market is important when considering an investment decision. This includes looking at the competitor’s strengths and weaknesses, as well as their pricing strategies.)

What is risk analysis? 

Risk analysis is a process that identifies, assesses, and manages the risks associated with a project, product, or business. It involves identifying potential risks, analysing their severity, and taking measures to reduce them. Risk analysis can help organisations make informed decisions and reduce the chance of costly surprises.

What is financial due diligence? 

Financial due diligence is the process of investigating a company’s financial information and records to assess its financial health. It is usually conducted prior to a merger, acquisition, or other large transaction. Financial due diligence helps identify potential financial risks and areas of potential cost savings. It also helps identify opportunities to increase revenues and profits.

What is business analysis? 

Business analysis is the process of gathering and analysing data about a company’s operations, customers, and competitors in order to identify opportunities for improvement and create strategies for achieving business goals. Business analysts use a variety of techniques, such as data analysis, process mapping, stakeholder interviews, and customer surveys, to identify opportunities for improvement. They then work with stakeholders to develop solutions and create plans for implementation.

As an investment broker, what due diligence should i do on a potential investment supplier? 

1. Research the company’s background and financial history. 

2. Review the supplier’s portfolio of investments, including any past performance data. 

3. Analyse the supplier’s investment strategies and risk management practices. 

4. Verify the supplier’s credentials and qualifications. 

5. Ask for references and speak with past clients. 

6. Investigate the supplier’s client services and fees. 

7. Review the supplier’s compliance record and any relevant regulatory actions. 

8. Confirm the supplier’s insurance coverage. 

9. Evaluate the supplier’s reputation and trustworthiness.

Due Diligence for Off-Plan Investment Property

Why should i do due diligence on a property developer before buying an off-plan property from them? 

It is important to do due diligence on a property developer before buying an off-plan property from them in order to ensure that they have the necessary experience, qualifications, and financial stability to complete the project. You should also check their past projects to ensure they have a proven track record of building quality properties on time and within budget. Additionally, you should review the developer’s legal and financial documents to ensure they are in good standing and do not have any outstanding legal issues or financial problems that could impact the completion of the project. Finally, you should verify the developer’s license and accreditation to ensure the project meets local building and safety codes.

What due diligence should i do on an estate agent for off-plan property? 

1. Check their experience: Ask the estate agent how long they have been in business and when they started specialising in off-plan property. Ask to see examples of their past projects and get references from past clients. 

2. Research their reputation: Read reviews of the estate agent online and ask to speak with past clients. 

3. Check their qualifications: Make sure that the estate agent and their team are fully qualified and licensed to work in the specific location. 

4. Understand their fees: Ask to see a breakdown of the estate agent’s fees and services and make sure that you understand what is included in the fee structure. 

5. Ask about their process: Ask the estate agent to explain their process for buying off-plan property. Make sure that you understand their process and the risks associated with it. 

6. Verify their credentials: Make sure that the estate agent is a member of a professional organisation or association and verify their credentials.

What due diligence should i do before buying an off-plan property? 

1. Research the developer: Check out the developer’s reputation, track record and credentials. Make sure the developer has a good reputation in the market and a proven track record of successful projects. 

2. Check the legal documents: Make sure the legal documents are in order and the property is free from any legal disputes. 

3. Analyse the location: Consider the location of the property and make sure it is situated in an area which has good infrastructure and amenities. 

4. Understand the payment schedule: Make sure you understand the payment schedule and all the associated costs such as stamp duty, registration fees, etc. 

5. Check the quality of construction: Inspect the construction quality and check for any defects in the building. 

6. Compare prices: Compare the prices of similar properties in the vicinity and make sure the price is fair and reasonable. 

7. Seek professional advice: Seek professional legal and financial advice before investing in an off-plan property.

Who can help me with due diligence before buying an off-plan property? 

A qualified real estate attorney can help you with due diligence before buying an off-plan property. They can review the due diligence documents, such as the title report and the building plans, to ensure that you are making a safe and informed investment. They can also advise you on any potential legal issues that may arise from the purchase. Additionally, a real estate appraiser can provide an independent assessment of the value of the property and help you evaluate whether it is worth the investment. Finally, a financial advisor can help you analyze the risks associated with purchasing an off-plan property and provide guidance on how to manage those risks.

Due Diligence for Alternative Investments & Property Bonds

Who can help me with due diligence before buying a loan note? 

You should consult with a lawyer or financial advisor who specialises in loan notes. They can review the loan documents and help you understand the terms and conditions of the loan note, as well as any potential risks associated with the loan. Additionally, they can help you evaluate the financial stability of the borrower and the value of the loan note itself.

What due diligence should I do before buying a loan note? 

1. Verify the loan note’s principal balance and terms, including the amount of the loan, the interest rate, and the repayment terms. 

2. Review the loan documents and make sure that the loan is legally binding and enforceable. 

3. Confirm the creditworthiness of the borrower, including their current financial situation and any prior loan defaults. 

4. Verify that the borrower is current on their payments and has not missed any payments. 

5. Obtain a market appraisal of the collateral securing the loan note. 

6. Review the loan note’s security agreement and lien position, if any. 

7. Investigate the title to the collateral and make sure it is unencumbered. 

8. Verify that all taxes and insurance on the collateral are up to date. 

9. Check the loan note’s history to make sure it has not been involved in any fraud or other criminal activity. 

10. Make sure the loan note is adequately insured against any potential losses.

Finding a Due Diligence Specialist

Why would i spend money on investment due diligence? 

Investment due diligence is a process of researching and analyzing potential investments to ensure that they are sound and offer the expected returns. It is an important step in the investment process, as it provides investors with the information they need to make an informed decision about whether to invest or not. By spending money on investment due diligence, investors can mitigate risk, maximise returns, and ensure that their investment strategy is on track.

Prevention is way better than cure, and spotting potential costly issues before committing to an investment is what due diligence is all about. Which makes investing financially in due diligence something that can pay great dividends in the long term.

Is there a service to do alternative investment due diligence in the UK? 

Yes, there are a number of firms that offer alternative investment due diligence services in the UK. For example, Duff & Phelps, Alvarez & Marsal, KPMG, Ernst & Young, and Deloitte all offer due diligence services. Additionally, there are numerous smaller boutique firms that specialise in this area as well.

What is a boutique due diligence firm? 

A boutique due diligence firm is a specialised firm that provides due diligence services to clients, typically in the areas of financial, legal, or operational due diligence. Boutique due diligence firms offer specialised expertise and tailored services to clients and may have a narrower focus area than larger, more comprehensive due diligence firms.

How do i know third-party due diligence is independent? 

The best way to ensure that a due diligence process is independent is to hire a third-party firm to conduct the process. An independent firm will be free from any potential conflicts of interest and can provide an unbiased assessment of the situation. Additionally, if the due diligence process is conducted by the company itself, it is important to have clear policies and procedures in place that ensure that all individuals involved in the process remain impartial and objective.

How do i know that third-party due diligence is honest? 

The best way to ensure honest due diligence is to use a reputable and experienced due diligence provider. A reputable due diligence provider will have a track record of providing honest and accurate due diligence. Additionally, you can ask for references and speak with their past clients. It is also important to make sure that the due diligence provider is compliant with relevant laws and regulations. Finally, you should also inquire about their processes, methodology, and quality assurance guidelines.

Getting Support from Diligent Eye

Can you help me with “doing my own due diligence” 

Doing your own due diligence involves researching and gathering as much information as possible about a particular subject or decision. This includes conducting research on the topic or decision, talking to experts and other knowledgeable people, asking questions, and using any other available resources. It is important to remember that doing your own due diligence does not guarantee any particular outcome, but it can help to inform better decision making.

What do I need to know about you before asking you to do investment due diligence? 

Before asking us to do investment due diligence, you should know what type of investment you are interested in, how much money you are willing to invest, what the expected return on investment is, and the expected timeline for the investment. It is also helpful to have an idea of the risk profile of the investment (we will refine this for you), the background and experience of the team managing the investment, and any other relevant information about the investment. Additionally, you should be aware of any regulatory or legal requirements that may be applicable to the investment. We can help you with all these as part of your initial consultation with us.

Can you guarantee your due diligence findings? 

No, due diligence findings cannot be guaranteed. Due diligence is an exercise in careful research and analysis, and its results cannot be guaranteed due to the inherent uncertainty of the process.

Can you advise me on whether an investment is right for me?

No, we cannot not provide any investment advice. We research investments and report our findings but it is for you and your accredited financial advisor to apply our findings to your own personal circumstances.

Why would I trust you, before asking you to do investment due diligence? 

Trust is earned, not given. Before asking us to do investment due diligence, you should look into our track record, speak to references, and review the credentials and experience of our team. Our team should also demonstrate honesty and transparency throughout the process. A good working relationship based on trust is essential for successful due diligence, so take the time to get to know us and make sure that we are the right fit for your needs.

How do I know you are independent? 

You can look up reviews online, ask the people you know who have worked with us, or check our credentials to verify our independent status. Additionally, you can contact us directly with any questions or concerns you may have.

I have more questions. How do I get in touch with you?

We’d love to talk with you. If you’ve got this far, it’s the least we can do! Book a Question & Answer call with us as part of your due diligence on us!


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