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Many real estate transactions can initially seem “too good to be true,” especially for investors exploring a 1031 Exchange out of California and into Texas. Buyers and their agents often get excited when the numbers appear favorable, but a deeper review can reveal hidden risks.

Some deals may carry significant drawbacks not disclosed by the seller. For example, examining lease agreements and meeting tenants might reveal that several occupied units plan to move out shortly after purchase. This could leave the buyer with a fully vacant property, making it a poor investment decision.

1) Third-Party Confirmations: Always verify financial information provided by the seller or their agent with independent third parties. Common sources include CPAs, banks, insurance companies, vendors, and governmental agencies.

2) Analyze Expense Items: For variable expenses, review costs carefully to understand their true impact as a new owner. This includes insurance premiums, property taxes, management fees, and other non-fixed costs.

3) Focus on the Big Items: During due diligence, prioritize numbers that significantly affect your investment decision. Identify major risks early to avoid costly mistakes.

To navigate complex transactions safely, it’s essential to work with an expert skilled in thorough due diligence. The brokers at DMC Investment specialize in guiding investors through critical analysis to ensure informed, successful real estate decisions.