Real estate and land development are typically seen as one of the wisest investment options available for generating passive income, and as a long-term investment strategy. With successful outcomes, the ROI has the potential to be huge and life-changing. Correspondingly, the possibility of failure can have major consequences for your wallet.
In this guide, we will touch upon some of the biggest pitfalls of land development to look out for, and what you can do to avoid them.
Common errors and performing due diligence
The burden of responsibility in a development project ultimately falls on the property owner and developer. With so many hurdles and threats to the budget along the way, it’s necessary to remain aware of each step, and perform due diligence to ensure a successful project.
There’s an entire list of prerequisites that should be met before considering moving forward with development.
Hire a land surveyor and title company
It’s advisable to hire a land surveyor for the most accurate assessment of the property, as soon as possible. A survey is the best way to confirm the official boundaries of the land, as well as determining the slope and elevation, for the purposes of drainage. In addition, the survey informs if there are existing utilities, or any protected natural surroundings within the perimeters.
Next, you’ll want to make sure that the title for the property is clean and unencumbered. The best way to do this is hiring a reputable title company to discover if there are any people or businesses with legal claims to the land. They report also includes a full history of ownership, and exposes any existing liens, outstanding payments, or unpaid property taxes. Confirming a clear title early will avoid legal disputes down the road.
Zoning and entitlement requirements
Each location has specific zoning rules and regulations determined by local government. Zoning dictates permissible land uses (agricultural, residential, etc.), and the types of structures allowed within a given space. The proposed project has to match those uses. However, it’s also possible to request waivers and obtain zoning variances, allowing development contrary to the normal zoning laws.
This process is frequently difficult and time consuming though, which is why it’s recommended to find land that matches the intended purposes as closely as possible. Because zoning codes tend to be so complex, they are somewhat open to interpretation and can be influenced by the city planners personal preferences and biases. The local government also has to consider the desires of their constituents.
Determine the mood of the neighborhood
Local politics and the mood of the neighborhood can be unpredictable and have a large impact on the success or failure of the project. Regardless of the official zoning rules, if the neighborhood decides they don’t like the proposal, they can and sometimes will work together to delay and even sink the entire operation.
This is why it’s always suggested to conduct as much research into the neighborhood as possible. Run surveys, research local businesses, speak with neighbors, and speak with local architects and builders. They will all give a general sense of how receptive the neighborhood may be to your project.
Safety codes and environmental impact studies
Besides zoning codes, there are also building safety codes and environmental regulations which must be adhered to in order to move forward. Things like fire exits, fire truck and hydrant access, and handicap ramps in particular, have specific requirements.
There’s also the issue of obtaining an Environment Impact Report. The necessity for one varies from state to state, and can be dependent on the type and size of the project. It’s still recommended to get an Environmental Site Assessment when an EIR isn’t officially required. The owner will be held responsible for any contamination discovered down the line, so it’s not recommended to take any chances.
While not a complete list, these are some of the most common obstacles owners and developers face in the early stages of development.
If you’re about to undertake your first development project, consider contacting APX West. We specialize in consulting services and guiding clients through the challenges of land development. Contact us today at 928-412-3570.
