There’s a serious appeal to owning a piece of land and being able to develop it however you want, whether that means building your dream home or using it as an investment opportunity. While it’s a completely achievable goal, there is a high learning curve involved.
Land development has a slew of costs and hurdles to overcome, which can come as a shock to inexperienced developers. Before putting down any bids, make sure you have a solid understanding of the expenses you’ll need to budget for.
Budget Items
Each potential land purchase should be taken on its own merits. Fees and surprise expenses are concealed throughout the development process, and every plot of land offers its own benefits and obstacles not always evident to new developers.
Onsite Conditions
Hiring a land surveyor is one of the best ways available to determine site conditions. A land survey will confirm the official land borders, and determines elevation and slope for drainage. Most importantly, the report reveals any existing utilities and any protected natural environments.
It’s also recommended to carry out an environmental assessment report to test the soil and water for hazardous contaminants. These reports also use databases to uncover any environmental liens put on the land.
If the report finds that there are potential environmental factors, it is highly encouraged that the issue be taken care of before you sign the agreement to avoid potentially expensive fixes.
Grading
If the land survey report showed drainage issues, it will be necessary to bring in an architect or civil engineer to do land grading. Land grading reshapes the land to ensure a stable, level base for a development foundation, and also corrects any water drainage problems.
Proximity to Utilities
All developments eventually need to be connected to utilities. Utilities include roadways, electric lines, sewage, water, natural gas, etc. For more isolated land, it could be necessary to run entirely newutility lines or extend existing ones long distances.
Local contractors and civil engineers will be able to provide estimates on the cost of running these utilities and the infrastructure needed. There are also sometimes tap fees for connecting the lines, which vary in price state to state.
Legal matters and bureaucratic expenses
Land titles
To avoid serious legal problems down the road, it’s advised to hire a title company to make sure no one else has legal claims to the land. They’ll also be able to discover the history of ownership, liens, and any unpaid property taxes.
Zoning
Zoning laws can be challenging to navigate even for experienced developers. Every location has it’s own zoning rules, and they vary widely from city to city and state to state. These laws essentially determine what types of developments are allowed in a location, but they can be extremely convoluted. It’s strongly recommended to budget for a legal advisor familiar with the local laws.
Building permits
A building permit is a document from the local government that ensures the development follows local safety regulations and remains up to code. The codes can be complex and costly to meet. For example, a building may require a specific number of fire escapes. Building companies and legal advisors familiar with these codes will be able to give a realistic estimate of the potential costs involved.
Impact fees
Development impact fees are a one-time up-front fee that requires private developers to pay to the local government, often as a precondition for receiving public approval. These fees are used to fund public infrastructure and take the burden off of tax payers. The prices vary from place to place, but it can be very costly at times. A legal advisor will also be familiar with the local impact fee rates.
Be ready for anything
Unexpected situations can pop up at any time, gumming up the works. Bureaucracy, extreme weather, supply shortages, etc. There should always be some money set aside in the budget for a potential emergency.
At APX West, we understand what goes into land development. We’ll navigate you through the process and help you transform your budget into a profitable development project. If you’d like to learn more about land development in Arizona, contact us at 928-412-3570.
