Sarah had been saving for a deposit for her first investment property. She had finally reached the requirements and received approval from the bank. Hunting for the investment property was now well underway.

Sarah’s plan was to find a small two bedroom property in a slightly lower price range and arrange for some friends to get together and do any cosmetic work. Sarah knew someone who had done a similar thing a few months before and they only needed to re-carpet, paint the inside and tidy up the garden, and then the property looked great.

After a few months of viewing properties, the perfect place came along. The property had overgrown gardens, patchy retro wallpaper and worn out carpet. Sarah could see so much potential that there was no way she was going to pass up this opportunity. Sarah felt confident in making an unconditional offer as she had viewed the property multiple times and as she was a second home buyer she was comfortable with the conveyancing process. Settlement day came around quickly and at last she was a proud owner of an investment property.

Sarah contacted her friends to arrange a weekend of DIY. The plan was to get the property looking fresh and modern as soon as possible, so that she could get tenants in quickly. That weekend Sarah put her friends to work. Some of her friends were in the living room and began pulling up the old carpet. All was going well until a large rotten area of the floor was exposed. The more carpet that was pulled away, the more rotten floor there was. Sarah was in complete shock of what had been discovered. Sarah’s friends could not believe the discovery either and when asking Sarah how the builder could have missed this when carrying out the inspection they soon realised that Sarah had never had a building report carried out.

It is important to complete your own full due diligence investigations on potential properties to reduce the risks, which are otherwise substantial. These enquiries would normally include obtaining a building report, LIM report, drug manufacturing report, enquiries with Council regarding zoning and planning, reviewing the property file at Council, valuation.