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On today’s episode, Darren and Christina are joined by Mimi Fei, CFO and Co-owner of HoneyBee Development Group, a boutique real estate development firm based in British Columbia. The three chat about how Mimi got into the real estate investing business, how she was able to grow HoneyBee Development Group into what it is today, and they also go over Mimi’s due diligence checklist. If you’re a real estate investor and you want the blueprint to everything you need to do before going in on a deal, you do not want to miss this episode!

Show notes:

00:00 - Introduction

1:40 - How Mimi Fei got into real estate investing

3:50 - What is HoneyBee Development Group?

5:30 - The keys to being successful in real estate investing

7:30 - The due diligence checklist

18:09 - Legal compliance

24:05 - Physical inspection

29:25 - Exit strategy assessment

34:20 - Example of a deal where something went wrong

38:20 - Team evaluation

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FIND HONEYBEE DEVELOPMENTS ON:

WEBSITE: https://honeybeedevelopment.com/

THE DUE DILIGENCE CHECKLIST:

Market Analysis:

 

• Study local market conditions, including trends in property values and rental rates.

 

• Research the supply and demand dynamics in the target market.

 

• Analyze demographic data such as population growth, income levels, and household sizes.

 

• Identify key industries and employers driving economic activity in the area.

 

• Evaluate employment trends and unemployment rates.

 

• Assess the overall economic outlook and growth prospects for the market.

 

Financial Analysis:

 

• Review historical financial performance of similar properties in the area.

 

• Analyze proforma financial statements to project future revenue and expenses.

 

• Scrutinize assumptions used in financial models, such as rent growth rates and operating expenses.

 

• Evaluate the proposed investment structure, including ownership interests and profit- sharing arrangements.

 

• Assess the availability and terms of financing, including interest rates, loan-to-value ratios, and repayment terms.

 

• Determine the eligibility criteria for potential investors, including accreditation requirements and minimum investment amounts.

 

Legal and Regulatory Compliance:

 

• Verify compliance with zoning and land use regulations, including any restrictions on development or property use.

 

• Confirm the legal ownership of the property through title searches and deed records.

 

• Review permits and approvals obtained for the project, including building permits, environmental permits, and zoning variances.

 

• Examine the terms and conditions of any legal agreements related to the property, such as leases, easements, or development agreements.

 

• Ensure that the proposed legal structure for the investment, such as a partnership or GP/LP, corporate structure is appropriate and legally sound.

 

Physical Inspection:

 

• Conduct a thorough inspection of the property to assess its condition and identify any potential issues or defects. (Drive-by or virtually)

 

• Obtain professional appraisal reports to determine the fair market value of the property.

 

• Review environmental studies and reports to identify any contamination or hazardous materials on the site.

 

• Evaluate geotechnical studies to assess soil stability and potential risks for construction.

 

• Check for the presence of underground oil tanks and obtain reports on their condition and any remediation efforts.

 

• Review occupancy reports if the property is livable/rentable

 

Exit Strategy Assessment:

 

• Evaluate potential exit strategies based on market conditions and investment objectives.

 

• Assess the marketability of the property and potential resale value based on current market trends.

 

• Consider the impact of economic cycles and interest rate fluctuations on the property's value and income potential.

 

• Review operating expenses and income projections to estimate future cash flow and return on investment.

 

• Determine the availability of financing options for potential buyers and the potential impact on resale timing and pricing.

 

Team Evaluation:

 

• Assess the experience and qualifications of the development team, including their track record of successful projects.

 

• Review the credentials of key team members, such as developers, architects, engineers, and property managers.

 

• Evaluate the strength of the team's professional network, including relationships with lenders, investors, and other industry professionals.

 

• Consider the team's reputation and credibility within the local real estate community, including any past legal or regulatory issues.

 

• Seek references from previous investors or partners who have worked with the team on similar projects.