Blog Post

Simplifying Real Estate Due Diligence with Greater Flexibility and Transparency

24.05.2024 | 7 min read | Written by George Barnes

Real estate due diligence is essential for making informed decisions before acquiring a property. The duration, effort, and cost of this process depend on the complexity and size of the project, as well as how the inspection is managed and, in new developments, how the work was carried out.

Today, there are solutions that simplify, streamline, and offer greater transparency to this process. This article explains what technical due diligence is, its process, and how digitisation can ensure technical checks are performed most efficiently.

image of two construction project managers shaking hands on a building site

Contents:

1. What is Real Estate Due Diligence and Why is it Important?

2. Contractual Due Diligence or Internal Due Diligence

3. The Real Estate Due Diligence Process

4. How to Ensure a Fast and Transparent Technical Due Diligence

5. How can you achieve better asset management and real estate due diligence?

What is Real Estate Due Diligence and Why is it Important?

Technical due diligence in real estate projects is a comprehensive assessment of the physical and technical aspects of a property before starting a development or investment project. It aims to identify potential issues related to construction, infrastructure, and other technical aspects that can compromise the integrity and value of the property. Technical due diligence is a part of overall real estate due diligence, which includes broader assessments of legal, financial, and commercial aspects, ensuring a complete and holistic understanding of the property.

Given this, it is evident that this inspection is crucial for investors, financiers, tenants, and even real estate developers before acquiring an asset, as it provides a solid foundation for decision-making, risk management, and ensuring the quality and safety of the property. No one wants to acquire assets with problems, so the more certain we are about the investment we are making and the better we can demonstrate it, the better.

It is also important for developers or companies interested in selling real estate to be aware of the importance of this inspection during the sale and have all the documentation updated on the project. For new construction projects, it includes the different phases of work to easily, transparently, and professionally demonstrate the quality of their assets. Today, there are solutions that make this process much simpler.

Outsourced due diligence or internal due diligence

The technical evaluation of real estate projects must be conducted by experts in fields such as civil engineering, architecture, mechanical and electrical installations, depending on the project. The decision to outsource or handle this service internally depends on factors such as the project’s complexity and the availability of internal resources, although outsourcing usually offers access to specialised skills and quality assurance in technical evaluation. And tools like PlanRadar can significantly speed up inspections if you have specialised staff on your team.

Some of the leading European companies specialising in this service, which also use our PlanRadar platform for greater transparency in their technical inspection services and workflow agility, are: ARCADIS, ARUP, CBRE, WSP and ISG.

PlanRadar has enabled our site inspection teams to gather site data quickly and efficiently, whilst significantly reducing the time required to process and present this data. There is huge potential to utilise PlanRadar further in the 3D-sphere and provide our clients with the best possible service.

ARUP

The Real Estate due diligence process

How long does technical due diligence take?

The duration of due diligence varies depending on the complexity and size of the project and the availability of relevant information. It can take from a few weeks to several months, depending on the depth of the evaluation required. It’s essential to dedicate the necessary time to conduct a thorough assessment to identify any potential issues that may affect the property without compromising the process’s quality.

The Cost of Technical Due Diligence

It is common for some consulting firms to charge a percentage of the project’s total value for their real estate due diligence services. The percentages can vary depending on the type of project, the provider’s reputation, and experience. The cost of technical due diligence can range between 0.10% and 0.25% of the property’s value.

Technical due diligence involves a meticulous and structured process covering several key aspects of the property. It mainly consists of:

  1. Planning and Document Review: Before starting the technical evaluation, a detailed plan is established that includes objectives, scope, timeline, and necessary resources for effective due diligence. This can include selecting technical experts, coordinating on-site inspections, and gathering relevant property documentation.

  2. On-Site Inspection: A thorough physical inspection of the property is conducted to assess its condition and technical state. This phase includes detailed checks of the building’s structure, mechanical, electrical, and plumbing systems, installations, and any other aspects relevant to the property’s integrity and operation.

  3. Data Collection and Analysis: All relevant information obtained during the inspection and additional available property documentation, such as plans, construction permits, maintenance reports, and previous repair records, are collected. This information is carefully analysed to identify any problems or risks that may impact the project.

  4. Reporting and Recommendations: Based on the findings and analyses, a detailed report summarising the technical due diligence results is prepared, including structural aspects, regulatory compliance, environmental impact, construction quality, etc. This report also describes identified issues, evaluates their impact on the project, and provides recommendations for their management and mitigation. Considering these key aspects during real estate due diligence ensures a complete and accurate property assessment, providing stakeholders with the necessary information to make informed decisions and mitigate risks during project development.

How to ensure a fast and transparent due diligence

As we’ve seen, this verification, quality assurance, and documentation process is essential for any investor purchasing a residential complex, industrial premises, hotel, or other real estate assets, as well as for developers or those interested in selling their assets. For the latter, the more they can have up-to-date documentation with easy and quick access to their assets, the easier it will be to demonstrate the quality and professionalism of their services and close the sale.

However, it is clear that due to the lack of documentation or poor communication, these processes can experience delays or become much more complicated than they could be with better management. This is where managing the entire asset lifecycle, from due diligence to subsequent maintenance, can be improved.

How can you achieve better asset management and real estate due diligence?

There are several solutions on the market, but here are some key points to consider when choosing one. PlanRadar focuses on seven key areas to streamline these processes and make them much more transparent:

  1. Centralised Documentation: Digitalisation allows for all documentation to be stored in one secure location with easy access for selected individuals, making the process much shorter and simpler.

  2. Centralised and Mapped Defect Registration: Having all detected defects recorded on a single platform offers significant advantages in identifying problems, finding solutions, and ensuring all building defects are addressed and resolved.

  3. Ease of Data Export: Centralised data simplifies report generation. PlanRadar allows filtering defects by asset, person, assigned workgroup, status, etc., and exporting them in PDF format.

  4. Simplifying Complex Reports: Depending on the project, technical reports like due diligence can be very complex. PlanRadar lets you create fully customisable forms for information collection, linking each field to a customised report template, and exporting it easily.

  5. Single Communication Channel: A simple chat within the platform to record all defects, incidents, requests for information (RFI), and required documentation simplifies communication.

  6. Information Transparency: Following the points mentioned above, greater transparency is achieved, trust is built with clients, and efficient asset management is ensured.

  7. Ease of Use: An intuitive and easy-to-implement platform like PlanRadar ensures quick adoption, with many clients up and running within just a couple of weeks.

 

By following these principles, digitalization significantly improves productivity and reduces costs in the due diligence workflow, benefiting developers and construction companies. If you are an investor, developer, or responsible for technical due diligence in a consulting firm, and want to learn about the latest digital developments for greater transparency and quality assurance in your inspections and projects, contact us for more information.

Book a personalised demo to find out exactly how PlanRadar could help you with due diligence.

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