How to Carry Out Due Dilligence When Investing in Property?
You will have heard the term 'due diligence' a lot when it comes to property but, what does this actually mean when it comes to buying an investment property?
Property due diligence is the process of properly evaluating an investment property before you buy. Through this process, the potential investor is seeking to understand the property's true commercial potential and any risks involved in the purchase.
Article updated: August 2025
Contents
The four steps of Property Due Diligence
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by Robert Jones, Founder of Property Investments UK
With two decades in UK property, Rob has been investing in buy-to-let since 2005, and uses property data to develop tools for property market analysis.
What is Property Due Diligence?
So, property due diligence is a series of reasonable steps that investors should take to help reduce the risk of buying an investment property.
Like a property investment checklist, due diligence helps you get comfortable with the property deal you are considering; however, due diligence is more specific to the property deal than the general concept of buying a property.
So, whether you're investing in serviced accommodation, buy to let or investing in an HMO, your due diligence is simply a way of describing the stages you must go through, if you want to reduce risks and your chance of being hit by a property scam.
Modern property tools can streamline this evaluation process significantly.
A property is always a big investment. There is a lot of money that goes into a property deal. So obviously, you don't want to make mistakes that could have been avoided if you had done your research.
And that is what due diligence means... research.
Understanding the Local Area
The first step to real estate research and due diligence is making sure that there is a ready local 'buyers' market willing to pay the prices of the properties 'on the market'.
It's helpful to know the City or Town is not at the beginning of a property market crash or suffering a boom in mortgage repossession rates which could indicate an affordability issue with prices being too high.
So, checking where the local market is in the 18 year property cycle gives you an idea of whether now is the right time to buy.
Ways to check this are:
- How quick does it take for properties to go from listed for sale to under offer. Under 30 days is a really active market. 31 to 60 days may be standard. 61 days or more could be seen as a slower market.
- Check what properties are selling and what are sticking on the market. Even in a slow or busy market, certain property styles will stand out. Maybe detached houses are limited in supply and have a really strong buyer market, pushing prices high. Or it's in an area with a young population and it needs affordable homes, likely apartments or maisonettes, but too much supply could be keeping prices low.
So, are there sales happening in the area in which you are looking to invest? What kind of property is selling? Who are the buyers?
It is knowing all this that constitutes sensible property due diligence.
Price Versus Value
Now you know if the location you are considering is at the right time of the cycle now we can what is the right price to pay is and how to get price versus value.
One way could be buying a property at below market value, but certainly, you want to ensure that you never overpay. Ways to check 'value' are:
- Check sold prices on local properties of a similar housing style and condition on the same street and nearby streets. Property identification systems, like unique street reference numbers can help ensure accurate comparisons by providing precise street data.
- Check recent on the market comparisons on uk property portals of similar properties currently on the market and what price they are listed for.
- Speak with local agents and look at local property data to see how quickly properties are selling and how active the market is to get an idea if the prices are correct, overvalued or potentially undervalued.
Calculating Rental Demand
Next, buying a property to invest isn't all about the price you pay. What happens after you purchase it? You must be able to check rental demand.
Your real estate due diligence and research must include checking rental values for buy-to-lets, student demand if you are buying purpose-built student accommodation and nightly rates and occupancy if you are buying a second home as a holiday let investment.
Property due diligence for rentals can include:
- Checking it is on the right street for tenants.
- Does it have the right postcode for short-term stays.
- It needs to be the right kind of property in terms of size, condition and style for your exact tenant type you are wishing to attract.
Research the Property Condition
The fourth aspect of property due diligence that investors should never overlook is conducting a professional survey. A survey provides an in-depth assessment of the property's condition, it can give you an idea of some minor problems, like damp and can uncover potential major issues like property subsidence or woodworm, that the average property buyer would likely miss on a casual viewing.
The cost of a survey is typically only a couple of hundred pounds and is well worth it.
Why Surveys Matter in Real Estate Due Diligence
- Identifying Hidden Problems: Surveys can reveal issues like subsidence, damp, or structural problems that could be costly to repair.
- Negotiation Tool: If the survey uncovers issues, you can use this information to negotiate the price or ask the seller to fix the problems before purchase.
- Future Planning: Understanding the property's condition helps you budget for any necessary repairs or renovations.
- Peace of Mind: A clean survey report gives you confidence in your investment decision.