Real estate debt due diligence: investor checklist
Due diligence on a private real estate debt deal is the independent review of the collateral, the borrower, the legal documents and the exit plan before any capital is committed. It does not remove risk, but it shows which risk is being taken and whether the pricing compensates for it.
This article is for general information. It is not investment advice or legal or tax advice.
Trends: what is happening worldwide and in Spain
- Worldwide, May 2026. European authorities have continued to warn about complexity, leverage and asset valuation in private credit. See the ECB view in its Financial Stability Review. In practice, investors should look more closely at how each loan is valued.
- Spain, 14 May 2026. The Banco de España (Spain’s central bank) included in its Spring 2026 Financial Stability Report a dedicated box analysing the private credit market in Spain. That the supervisor studies it separately suggests the market has gained weight.
- Spain, October 2026. The Observatory of Alternative Financing with Mortgage Collateral in Spain, with market analysis by PwC and the legal framework by Cuatrecasas, estimates a forecast volume of EUR 3,891 million in 2026 versus EUR 2,583 million in 2025. More volume and more deals mean larger quality differences between them. We cover it in alternative mortgage lending in Spain.
What due diligence means in private real estate debt
It is the process of checking, with documents and independent third parties, that what the deal presents is true and that the planned protections work. For loans backed by property it usually covers four areas: the asset, the borrower, the legal structure and the exit.
It is not a formality. A good review also rules deals out. If something cannot be verified, it is not financed.
Due diligence checklist: what is reviewed
| Area | What is checked | Document or evidence |
|---|---|---|
| Asset | Title, charges, planning status and physical condition | Land registry extract, licences, technical report |
| Value | Independent valuation and sale scenarios | Valuation by an approved valuer |
| Borrower | Solvency, track record and other debts | Accounts, credit information, references |
| Structure | Security, mortgage ranking and covenants | Contract, deed, legal review |
| Exit | How and when the loan is repaid | Documented sale or refinancing plan |
The collateral: title, charges and value
The first step is the land registry extract (nota simple): who owns the property and whether there are prior mortgages, attachments or encumbrances. A second-ranking mortgage does not carry the same weight as a first-ranking one.
Next come planning and physical status: licences, permitted use, occupation and the condition of the building. And then the valuation, which must be independent.
The borrower and the legal structure
Collateral mitigates risk, but the first line of defence is the borrower’s ability to pay. Accounts, track record, other debt and the people behind the company are reviewed. In development deals, the team’s experience and cost control are studied too.
On the legal side, the terms are read closely: maturity, interest, early repayment, acceleration events and reporting duties.
The exit strategy: the most overlooked point
A loan without a realistic exit is just a promise to pay. The question is how it will be repaid at maturity: sale of the asset, refinancing with a bank, or unit sales in a development. And what happens if the main plan fails.
The answer should be concrete, with dates and a fallback scenario, not just “the market will absorb it”.
Illustrative example: how LTV changes if value falls
This is an illustrative and hypothetical example, unrelated to any real deal. Assume a EUR 600,000 loan on a property valued at EUR 1,000,000. If the value falls, the LTV (loan-to-value, the ratio between the loan and the value of the collateral) rises:
| Scenario | Property value | Loan | LTV |
|---|---|---|---|
| Initial valuation | EUR 1,000,000 | EUR 600,000 | 60.0% |
| 20% fall | EUR 800,000 | EUR 600,000 | 75.0% |
| 30% fall | EUR 700,000 | EUR 600,000 | 85.7% |
The lesson is that the margin of protection is not fixed: it depends on the realisable value at the time of sale, including costs and timing.
Risks to consider
- Loss of capital. All investments carry risk, including partial or total loss of capital. Property collateral mitigates risk but does not remove it.
- Illiquidity and term. Money is tied up until maturity and the term may extend if there are delays.
- Valuation risk. A valuation reflects one moment. The sale price may be lower.
- Legal and enforcement risk. Recovering collateral can take time and cost money.
- Incomplete information. Due diligence reduces uncertainty but does not remove it.
How Ondara works
Since 2018, the management team at Ondara Group has analysed each deal individually, with real assets as collateral and with diversification in mind. Investors deal directly with the team. The minimum investment is EUR 25,000. Ondara seeks target double-digit returns, never guaranteed. Learn more about us and the group’s brands.
Frequently asked questions
What is due diligence in a real estate investment?
It is the prior review of the collateral, the borrower, the contracts and the exit of a deal, using documents and independent third parties.
Who carries it out?
Usually the management team, supported by independent valuers, lawyers and technical advisers. As an investor, ask what was verified and by whom.
Does good due diligence guarantee there will be no losses?
No. It reduces uncertainty but does not remove the risk of default, falling values or delays.
How long does it take?
It depends on the complexity of the asset and the documents. Excessive haste is often a warning sign.
What can I check myself as an investor?
Ask for the land registry extract, the valuation, the loan terms and the exit plan. Compare them with what you are shown.
In summary
- Due diligence reviews the asset, value, borrower, legal structure and exit.
- A deal that cannot be verified should not be financed.
- LTV changes if value falls: look at scenarios, not only the initial valuation.
- There is always a risk of capital loss, illiquidity and term extension.
If you would like to know how we invest, register as an investor and we will explain how it works. The minimum investment is EUR 25,000.
This article is for information purposes only and does not constitute an investment recommendation or financial advice. All investments carry risks, including the possible loss of the capital invested, and past or target returns do not guarantee future returns. Analyse each opportunity with a professional before investing.
