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DEC 2012/JAN 2013 |www.opp-connect.com WORDS | Simon Calton MD Rycal Investment Group


FEATURE


investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations.


Where do you start your research?


Working out the statistics of the City and Country the project is situated in, the economic projections of that area, the Environmental aspects, the exit strategy, etc, The list could be endless. Are you giving your clients the right project? Can you trust what you read or hear? These are questions we have all asked ourselves at some point when looking into an investment. As a broker, is the introducer fee enough to cloud your judgement toward a project? We can all be swayed by the sirens of the mighty dollar! However, If you earn a little less but the client gets a better product, isn’t this the best outcome? Gaining the trust of the client will pay dividends in the long run. Over the years, I have been approached to either invest, or have


Being diligent D


ue diligence is a term used for a number of concepts involving either an


my clients invest, in many projects and developments in many different countries. While some I looked into in more detail, some were just discarded at whim as I felt they either did not offer enough return or came with too large a risk to go through the arduous job of researching. I know now that this was a mistake. I am sure that I missed many amazing opportunities because I was not confi dent enough to look into projects I yet knew nothing about. I realised that spending time researching projects, the areas in which the project was being developed, the developers of the projects and the future exit plan for that project could mean that I was able to see the full benefi ts of every project and not just what was stated on the front sheet of the offering. However, this was time consuming. It was hard to decipher what was speculation and what was fact. We began to structure a process to help cut down this time. We then found that clients were coming to us with projects that we would have previously put to one side. These were projects that had great potential and were perfect for not only that client but other clients on our


Due diligence can seem like a daunting task even for the most experienced investor, but it’s worth doing the research. You’re less likely to miss an opportunity and more likely to avoid pitfalls, explains Simon Calton


DUE DILIGENCE | 51


Simon Calton is CEO at Rycal Investment Group, based in the US/UK. They specialise in Property Investment with Integrity and off er due-diligence services. He can be contacted by email at simon@rycalgroup.com


database. I now fi nd that we are able to fi nd the positives in a project and fi x any issues, because we put ourselves in the client’s shoes. If we are unable to fi x the issue that arises we drop that project. We


“Spending time researching projects meant I was able to see the full benefi ts of every one”


encourage our clients to question our projects and in this process fi nd that we are able to fi ll in the gaps of doubt and gain the trust of our clients. In this industry you need to


encourage your clients to complete their own due-diligence. If you have completed yours, any question that arises should be easily answered. This will help to cement your proposition’s integrity and help to inform you of the issues that scare a potential customer. Referring a client to a third party company who may have already completed such due-diligence is an option.


This process can help Developers encourage brokers to encourage their clients to invest their money into a project. If a developer shows a broker that their project has been independently researched by a third party with no connection to them, this helps greatly.


Brokers, ask yourselves this. Why would a developer shy away from giving you the full and frank information you require? Why would a developer not want you to complete your own research before investing your client’s money?


Brokers should look into every project and make sure that the developer they are working with is giving them all the facts regarding the type of investment they are asking their clients to invest in.


Let me leave you with these two pieces of advice. They seem simple but are often overlooked.


Completing initial background research on any developer, broker or company you wish to work with is a must. Encourage your clients to complete their due-diligence and gain their trust.


Do your homework | Due diligence is important for so many reasons – both for you and for your clients


Never be afraid of a client who asks questions and tests your knowledge of your projects as you should know everything about it. If you don’t know, you will once you have answered this for the client. We fi nd the only projects to invest in are the ones in which you have complete knowledge.


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