The process of developing a property requires more than meets the eye. Between buying the land and assessing its foundation to brainstorming solutions and estimating values, it can be a long journey from the initial down payment to the final ribbon cutting.
But physical property development is only half the battle. Truthfully, the greatest amount of work in property development starts before you even pick up the keys. Understanding what’s expected of you, as well as the pitfalls that exist, are paramount to navigating your next project in the most successful manner.
It’s best to familiarize yourself with the stages of pre-property development before signing any dotted lines. Here are seven things to look for in a property while considering a long-term development project.
There are seven major considerations you should have when choosing a property to develop: zoning, codes, landscape, financing, location, builders, and history.
Let’s explore each of these in greater detail.
1. Check Your Zoning
The truth is that properties cannot be developed to meet every need and expectation. In many cases, the perfect piece of land is barricaded in by city laws and zoning regulations that sanction its development to a single type of building.
Apart from residential and commercial zones, there are several zones to be aware of in major cities:
- Historic zones
- Industrial zoning
- Agricultural zoning
- Rural zoning
- Aesthetic zoning
Be sure to check with your contact to discuss zoning laws for your property.
2. Observe Building Codes
Building codes ensure the safety of developers, landscapes, and end clients by regulating construction and development projects.
For example, some codes may not permit the construction of certain roofs or room sizes. There may also be a restriction on the types of materials you can use, a consideration that is very predominant in historical zones.
Your local city or county planning department is likely to provide most of this information. Be sure to check under every stone and page; you never know what sort of surprises might come up later.
3. Evaluate The Landscape
“The topography of your property can make or break the development process,” says Ooi Kee Liang, founder and executive chairman of Ideal Property Group, a property development company in Malaysia. “Too steep, and you may spend thousands of dollars leveling things out and smoothing down the ground. Too shallow, and you may find yourself battling flood hazards or worrying about sinkholes in the future.”
Your best bet here is to hire a professional for surveying and inspecting the grounds. Ask yourself: what would it cost to build on this gradient? Will the outcome be worth the effort?
Modify your plans and adjust accordingly.
4. Consider Your Financing Options
If you don’t already have a go-to financing partner in place, it’s best to start considering your options in advance.
There are several types:
- Debt funding or traditional financing
- Syndicated financing
- Crowdfunding opportunities
- Joint ventures
- Sponsor equities
Keep in mind that financing thresholds are more or less limited by levels of completion. Properties at their earliest stages of development will be offered less financing than those ready for use.
5. Scour The Location
What does the general area look like from a development standpoint? Better yet, how will these surroundings impact the development process?
Don’t forget to consider:
- Crime rates
- Nearby schools
- Proximity to utilities
- Highway access
Each of these will have a significant impact on the value and potential earnings of the property.
6. Vet The Builders
Great builders lead to great development projects. Know that you’ve partnered with the very best before getting in over your head — or suffer the consequences as a result.
7. Get A History
No matter how safe the property may seem, evaluating its history for black marks will be critical for ensuring your investment.
Ask yourself: what sort of natural disasters have affected the property? Is there a history of flooding, wildfires, or storms?
Too many of these black marks should give you cause to reconsider.
Developing Your Final Property
Regardless of your experience or final intent, the property you develop should be carefully selected to avoid potential pitfalls.
In a physical sense, be sure to evaluate the geography, surroundings, zones, and building codes for possible problems or signs of danger. Any of these elements falling out of alignment may create expensive fixes or development roadblocks, all of which require more than you bargained for.
In a practical sense, take some time to evaluate your financing options and selected building team. Either of these will have a substantial impact on the property and its final result, which is why ensuring efficacy is extremely important at every level of development.
Finally, perform due diligence in researching the history and past issues of a property. Identify flooding hazards, consider recent natural disasters, and check for pest infestations or mold concerns that may jeopardize the success of the project.
Above all else, don’t go the distance alone. Whether you’re an experienced developer or a brand-new industry face, choose to partner with experts who have walked the path before.
Odds are, you’ll be glad you did.