Regardless of what your building intentions are, land development is quite complex, which is why the process is broken down into three stages.
The three stages of land development are pre-development, construction, and post-development. Pre-development is the planning and logistics stage. Construction is the physical process of development. And post-development involves either re-sale or property management.
The real estate market is a competitive industry and for many aspiring property owners, it is likely one of the biggest purchases and investments that they will ever make in their lives, which is why there can be so much pressure on nailing all stages of land development properly. Developing land requires time, patience, and thorough planning to avoid any complications and discrepancies. To make developing your land much easier, we are going to take you through the entire process of land development by breaking it down into three stages.
Before you pursue any type of land development, you should make sure that whatever development project you take on is within the legal zoning rights of your area. To find out what these are, visit your county’s local building authority to discuss your project with a professional consultant.
Table of Contents
Stage 1: Pre-Development
One of the biggest mistakes that amateur land developers make is that they overlook vital aspects of their pre-development stage.
Failure to thoroughly weigh out the logistics of a development project can result in issues occurring throughout the entire process of development with complications such as legal issues, financial miscalculations, and even abandoned projects.
The key thing about the pre-development stage of land development is to ensure that all of your tracks are covered before you begin doing any physical building. Once you have properly gone through your pre-development, you can rest assured that one of the biggest hurdles of your build is taken care of.
With that being said, you are going to want to approach pre-development carefully and systematically by going through the essential steps of the process. Let’s take a closer look at the pre-development stage.
Budgeting & Logistics
The first step of pre-development is to weigh out your finances and come up with a concept for your development project. The best way to start this is to have a clear idea of what you want to do with your development.
Having some vision for your project will help you narrow down your search for a site and will give you a realistic figure of what you can expect to pay at the end of it all. This will essentially be the foundation on which you will base your entire development.
If you are working with business partners or investors on this development, having a formal sitdown with your colleagues and associates to discuss the initial planning will be mandatory. As you discuss logistics and your budget, you should be able to reach a final agreement on what the collective can achieve and afford with the project.
If you are an independent developer who is a real estate investor or simply a private individual, your budgeting and logistics will be easier to determine, as you do not rely on approval from partners to continue pursuing your development.
The golden rule of real estate acquisition and land development is that location is absolutely key. The location of a property is what determines its overall worth and potential, which is why you want to do thorough research when committing to where you want to develop your project.
Depending on what your goals are for your development, having a general idea for your location should be relatively clear. If you are aspiring to build a private residence or commercial business, you will likely be searching for land that is located within an urban environment. If you are pursuing industrial or agricultural development, then you will find that most rural areas are much better suited for your plans.
With that being, there are exceptions to this and you should always carefully weigh out all of your options before making any commitments. As you scout for a location, make sure you are evaluating the market trends of the area you are assessing.
Regardless of what your property intentions are, developing on land that has promising potential for increased value is always the way to go. At the end of the day, every land development is an investment opportunity.
A great way to confirm the potential increase in property value is to evaluate the local job market and economy of the area you are considering. Locations with a strong economy tend to have much more financial stability and will have steady increases in property value. However, if you are developing a project that is focused on cheap land for industrial use, then this may not be as important of a factor to consider.
Surveying & Property Assessment
Once you have narrowed down your search and feel confident about a plot of land, you are going to want to have a professional come to survey the property.
Having your land professionally surveyed is absolutely essential to ensure that you have the full specs of your property. This will guarantee that you do not run into legal disputes regarding property lines, as well as confirming that the specs of the property are in line with the logistics of your development.
After a surveyor has checked the precise measurements of your property, you are going to want to evaluate the environmental qualities of the land. To do this you must hire a professional to come to conduct an Environmental Impact Report on your property.
The Environmental Impact Report of your property will determine how your development will affect the ecology of your location. This is an important step, as environmental violations are sometimes factors that stop projects dead in the water.
So long as your development does not violate any environmental laws, put any vital species at risk, or cause damage to valued natural resources, you should not have any issues getting a green light from your impact report.
Land Purchase & Development Planning
The way you purchase your land will be dependant on how you have organized your budget. If you have adequate savings to back your land acquisition, then the process of finalizing your land purchase will be relatively straightforward.
If you do not have the savings to back your land purchase, you will likely need to have a mortgage or loan to finalize your acquisition. However, if you are working with investors, you may need to get final approval from your partners to confirm the cost of the property.
Once you have successfully purchased your land, you can hit the drawing board and begin planning out your development. You should review your initial planning and logistics and start sketching out how to implement them onto your site.
For this, you may want to seek professional help by hiring a development planner. Your planner will help you confirm the specs of your property in relation to your initial plan. This will ensure that your development is realistic and financially viable.
A critical part of the pre-development stage is to get final approval from your local county or municipality.
To do this, you need to get zoning permits for your development, which assure your local county’s building authority that there are no violations. This process begins with you providing documentation, which details and confirms that you are the legal owner of the property.
Next, you will need to fill out a series of different applications and paperwork that involve the specs of your property and the intentions of your development. You should have a well-laid-out plan of your entire build before approaching your zoning permits.
Your building authority will also assess whether your land development is violating any environmental laws or is jeopardizing the ecology of the area. If all aspects of your development meet the standard of your local county or municipality, you will be granted legal approval for your build and will be given your zoning permits.
Stage 2: Construction
The construction stage of your land development is where you see all of your planning and initial footwork come into action.
There is a lot of pressure to approach construction without error, as mistakes during this stage cannot easily be undone. The process of pre-development is vital, but at least complications during the first stage can be altered or remedied, as planning can generally be much more flexible.
Committing to construction means that you should have precise planning that is ready to be executed through physical development. Miscalculations during the construction stage mean that you may need to re-evaluate your budget, delay a project deadline, or forfeit your build altogether if serious factors were unaccounted for.
To understand the construction stage of your land development better, let’s take a closer look at the entire process.
Unless you are developing agricultural land, you will likely need to have extensive work on your property to give it full access to utilities. This is especially the case for developing on vacant or raw land, but it may also be necessary to confirm this for land that has already had some sort of development on it (regardless of size).
The reason for this is that some land developments may lack certain utilities or not meet the standard for utilities that your development project demands. If your land does not have any utilities on it, you will need to reach out to the utility providers of your area.
Each state and county may have different service providers for these things, which is why you will want to do some research for your specific location. Your local municipality will likely be able to provide you with some of your utility connections.
However, many areas have private utility companies and you will need to reach out to them independently. In most cases, private utility companies have monopolized their industry and there will not be competition for your area, which makes your search easier, but less flexible. These are some of the common utilities connected to developments:
- Telephone Wiring
- Waste Management
Depending on the type of development project you are pursuing, you may need to have a connection to most or all of the above utilities.
To begin physically building your development, you will need to hire various contractors to get your project in motion.
Your primary contractor will be the construction company that you decide on. This organization should be able to meet all of your standards and specifications for your project. To confirm this, you are going to want to sit down with a lead representative of the organization and have a thorough analysis of all of your plans.
As you weigh out the logistics of the build, you should be able to determine whether the construction company is capable of carrying out your plans. Once this is taken care of, the representative of the construction company will give you a final figure for what kind of costs can be expected and what the general timeframe of the project will be.
It is during this phase that you want to confirm any deadlines for the project, as well as any budget limitations. Once an agreement has been made, it will be finalized with a contract and your build can begin.
It is often the case that contractors tend to work with one another. Your construction organization may have contacts for architects, interior designers, and other industry professionals to help carry out the rest of the details of your development. Otherwise, you will need to locate independent contractors on your own to finalize all aspects of the project.
If you are working with reputable professionals and have provided them detailed planning with precise specifications, you should be in good hands and can feel confident about the outcome of your build.
With that being said, it never hurts to give your project additional oversight to ensure quality control. If you are personally in charge of delivering the final outcome of your development, then you should take responsibility for overseeing the entire project intimately.
The best way to guarantee quality control of your development is to, firstly, be aware of all details of the project and its planning. This can be overlooked by many real estate investors who only look at the numbers of a project and not its actual physical development.
As your build gets on its way, act as a passive supervisor and observe the progress that your contractors make routinely. Evaluate the physical build and cross-reference the results to your budget. If your budget is matching up with your development’s progress, then you should have a certain level of assurance that things are moving smoothly.
However, you should also be evaluating the specs of the build; checking up on the overall structure and layout of the development as a whole. It’s quite common for amateur contractors to make mistakes throughout the course of a project. If these mistakes are caught early on through proper quality control, you should be able to make arrangements to fix them.
The last thing you want to do is lack the necessary quality control to catch issues early on, which result in major development complications. These can be time-consuming and costly for you and your potential investors.
If you do not have the experience or simply feel that you are not capable of maintaining quality control of the project, then you should hire a project manager that takes responsibility for this. A project manager should be well versed in your type of development and should have a clear understanding of the project goals and their specifications.
Stage 3: Post-Development
Once your construction stage is over, your physical development should essentially be finalized. If your contractors have done their job right and carried out your plans to your specifications, you will be in the post-development stage of your project.
Post-development is all about finalizing the last details of your build and ensuring that all tracks have been covered. During this stage, you will also establish your final intentions for the development itself.
Before you begin your initial post-development process, you want to confirm that the project has been concluded properly to avoid any discrepancies with your contractors and investors. This will likely mean that you will need to do a final assessment of the development and review the results in comparison to your plans.
After confirming that the project has been completed successfully, your post-development stage may differ depending on what you plan to do with the development. Let’s take a closer look at the post-development stage.
Private Residence & Commercial Business
If you have been building a private residence for your land development, then your post-development stage is relatively straightforward, as all you essentially need to do is move into your new home.
As you do so, you should carefully review all aspects of the development to confirm that your residence has full functionality. While walking through your new home, check that all utilities are working properly; make sure that you have running water, there are no issues with lights, electrical outlets have power (etc.).
In addition, have a careful look at the overall interior and exterior structure of your home. To do this, check to see that surfaces are level and that the overall design of the property is matching your specs.
For a commercial business, you will want to confirm all of the same details of your development, but you will also want to ensure that the project is in line with all permits and licenses that your business needs to operate. This step is especially important for industrial businesses that have strict regulations.
For many land developers, the initial prospect of developing land is merely a real estate investment that they plan on selling off after completion.
If you have been meeting with buyers early on, then you should have a relatively smooth transition in selling your land. Before you can successfully sell off your development, your buyers will want to review the project to confirm that the physical details of the property match what they agreed to.
However, if you do not have buyers yet, you will need to hunt down individuals interested in purchasing your property. This can be done by listing your development on various online real estate services or you can entrust a real estate organization to handle the sale.
An important factor to keep in mind when selling off your development is to assess the current market trends of your area. Ideally, you would have done this during your pre-development stage to have a general prediction of the market by the time your project finished.
Regardless, market trends can fluctuate and be quite unpredictable in some situations, which is why you want to observe the market before committing to a sale. If the market of your area does not seem as promising as you had initially hoped, it may make sense to sit on the development and wait for a better time to strike. If you are seeing that the market value of your project is in the general figure of what you expected it to be, that should be a good reassurance that it is a good time to sell.
However, if the market of your area is better than predicted and appears to be on the rise, it may actually make sense to hold on to the property to see if you can make better profits from your project in the future. You should, however, take this approach with caution and have a reliable sense that the market will continue to rise.
Depending on the initial intentions of your land development, you may not have had a clear idea of what the outcome of your property would be - or you may have simply had a flexible outcome.
If you do not plan on selling your land, utilizing it for business purposes or a private residence, then you will likely need to manage your property. Being in a position to manage your property comes with a lot of benefits for the owner but also a lot of responsibility.
Given that land developments still need to be taken care of to retain their overall value, you will have to manage the property and carry out a certain level of quality control for the duration of your ownership.
A common example of property management, in this case, would be a land developer that established a project to be a private residence or a commercial business without the intention of personally using it. This would involve a land developer renting out the property for profit, which is a great way of seeing an immediate return on your land investment.
However, while you are renting out your land development, you will need to confirm that the property is being looked after properly by the tenant. In addition, the responsibility of maintaining the property still lies on you, which is why it is best to rent to reliable tenants that will treat your property with respect.
Another great benefit of being a property manager is that you are able to have flexibility with your development intentions. If you had initially planned to establish your development as a rental property, you can make a profit from your land immediately while at the same time observing market trends. If you happen to see that the property market of your area is on the rise, you can always conclude your rental agreements and then sell off the land.
About THE AUTHOR
Cameron Scott has been in the land development industry for over 20 years. During that time, he has worked on hundreds of development deals ranging from 5 acres to over 100 acres. Most of his work has been in Utah and Texas, where he has worked for large, national home builders as well as local companies. He has worked as Land Entitlement Manager, Land Development Manager, and most currently as Land Acquisition Manager.Read more about Cameron Scott