Before You Buy the Property: A Development Feasibility Checklist
The worst time to discover a property won't work for your intended use is after you own it. Whether you're considering raw land, an existing building for renovation, or a commercial redevelopment opportunity, thorough feasibility investigation before purchase can save you from expensive mistakes and dead-end projects.
Professional Due Diligence Required
This checklist highlights investigation areas but is not a substitute for professional due diligence. Property purchases typically require attorneys, title professionals, surveyors, engineers, environmental consultants, land-use advisors, and other licensed specialists based on your specific situation.
Zoning and Permitted Uses
Zoning determines what you can build and operate on a property. Don't assume the zoning designation matches your intended use without verification.
- Current zoning classification: Residential, commercial, industrial, mixed-use, agricultural, or special districts
- Permitted uses by right: What you can build without special approvals
- Conditional uses: Uses requiring planning commission or board approval
- Prohibited uses: What's explicitly not allowed under current zoning
- Development standards: Height limits, setbacks, lot coverage, parking requirements, landscaping
- Overlay districts: Historic preservation, design review, environmental protection, or other special requirements
- Pending zoning changes: Proposed general plan amendments or rezoning that could affect the property
If your intended use doesn't match current zoning, investigate the rezoning process, timeline, costs, approval probability, and community attitudes. Some jurisdictions process rezonings in months; others take years with uncertain outcomes.
Site Access and Utilities
Access Rights and Road Standards
Verify legal access from a public road. Easement access, private roads, or shared driveways can create complications for development, financing, and future operations.
- • Legal access: public road frontage vs. recorded easement vs. prescriptive access
- • Road condition and maintenance responsibility
- • Width, grade, and turning radius for construction equipment and emergency vehicles
- • Seasonal access restrictions (flooding, snow, fire closures)
- • Required road improvements for building permits
- • Shared access agreements and cost-sharing provisions
Utility Availability and Connection Costs
Don't assume utilities are readily available. Connection costs for water, sewer, gas, and electricity can dramatically affect project feasibility.
Municipal water: Availability, capacity, connection fees, service extension costs
Well water: Drilling costs, yield testing, water quality, ongoing testing requirements, permit timeline
Water rights: Ownership, priority, limitations, transfer restrictions in some jurisdictions
Municipal sewer: Connection availability, capacity, fees, line extension requirements
Septic system: Soil testing, percolation tests, health department approval, system size and cost
Alternative systems: Engineered systems, community systems, costs and maintenance
Electric service: Available capacity, transformer location, line extension costs, three-phase availability for commercial/industrial
Natural gas: Service availability, connection fees, alternative fuel requirements
Internet/data: Fiber availability, speeds, installation timeline, backup options
Phone service: Landline availability, cellular coverage quality
Physical Site Conditions
Topography and Grading
Steep slopes, poor drainage, unstable soils, or significant grade changes can substantially increase development costs.
- Topographic survey: Accurate elevation data, drainage patterns, buildable areas
- Geotechnical investigation: Soil bearing capacity, expansive soils, groundwater, seismic considerations
- Grading requirements: Cut and fill volumes, retaining walls, drainage improvements
- Rock or hardpan: Excavation difficulty and associated costs
- Flood zones: FEMA flood maps, elevation requirements, insurance implications
- Wetlands or waterways: Jurisdictional determinations, setback requirements, mitigation
Environmental Considerations
Environmental issues can delay or prevent development. Some concerns require licensed environmental professionals to investigate.
Environmental Red Flags
- • Prior industrial or commercial use (potential contamination)
- • Underground storage tanks (current or historical)
- • Hazardous materials storage or disposal
- • Asbestos or lead paint in existing structures
- • Protected species habitat
- • Archaeological or cultural resources
- • Wildfire hazard zones requiring specific construction standards
Entitlements and Approvals
Understanding the approval process, timeline, and associated costs helps evaluate project feasibility and schedule.
- Planning review: Site plan approval, design review, architectural review board
- Public hearings: Planning commission, city council, board of supervisors for certain projects
- Environmental review: CEQA (California), NEPA (federal), or state equivalents requiring environmental documents
- Agency comments: Fire department, public works, utilities, school district, other affected agencies
- Building permits: Plan review timeline, inspection requirements
- Specialty permits: Grading, encroachment, septic, well, demolition, hazardous materials
Entitlement timelines vary dramatically by jurisdiction and project complexity. A straightforward residential project might receive approvals in months, while a controversial commercial development could take years with appeals and litigation risks.
Financial Feasibility
Preliminary Budget Components
Develop a realistic preliminary budget before committing to purchase. Include all project phases and costs.
Acquisition Costs
- • Purchase price
- • Closing costs and title insurance
- • Due diligence investigations
- • Legal and consulting fees
Soft Costs
- • Architectural and engineering design
- • Surveying and geotechnical work
- • Environmental studies
- • Permits and plan review fees
- • Utility connection fees
- • Legal and consulting
- • Project management and oversight
Site Development
- • Grading and excavation
- • Utility extensions and connections
- • Access roads and paving
- • Drainage improvements
- • Landscaping and irrigation
Construction Costs
- • Building construction
- • Finishes and fixtures
- • Mechanical, electrical, plumbing systems
Financing and Carrying Costs
- • Interest during development
- • Property taxes during development
- • Insurance
- • Utilities and maintenance
Contingencies and Reserves
- • Design contingency (typically 5-10%)
- • Construction contingency (typically 10-15%)
- • Schedule contingency for delays
Financing Considerations
Understand financing requirements and constraints before committing to purchase. Development financing differs significantly from conventional real estate loans.
Development Financing Questions
- • Down payment requirements (often 20-30% for development projects)
- • Interest rates and terms for acquisition vs. construction financing
- • Lender requirements for plans, permits, and presales
- • Personal guarantee and recourse provisions
- • Draw schedule and inspection requirements
- • Reserve requirements for cost overruns
- • Exit strategy and permanent financing plans
Schedule and Risk Assessment
Realistic Timeline Development
Create a preliminary schedule including all phases from purchase through completion. Factor in seasonal constraints, permit processing times, and potential delays.
- Due diligence period: 30-90 days (or longer for complex projects)
- Design and engineering: 3-9 months depending on project complexity
- Entitlements and permits: 3-24 months depending on jurisdiction and project type
- Site development: 2-6 months for most projects
- Construction: 6-24 months depending on size and complexity
- Closeout and certificate of occupancy: 1-3 months
Major Risk Factors
Every development project carries risks. Identifying potential problems during due diligence allows for informed decision-making.
• Entitlement denial or costly conditions
• Unforeseen site conditions increasing costs
• Utility connection delays or unavailability
• Permit processing delays
• Cost escalation beyond budget
• Weather or seasonal delays
• Contractor performance issues
• Financing gaps or changed terms
• Market changes affecting end value
• Thorough due diligence before purchase
• Contingency provisions in purchase agreement
• Adequate budget contingencies
• Pre-application meetings with agencies
• Qualified professional team
• Realistic schedules with buffer time
• Clear contracts and scopes of work
• Regular project monitoring and documentation
• Adequate financing reserves
Working With Professionals
Complex property acquisitions and development projects typically require coordination among multiple licensed professionals, each providing specialized expertise within their area of practice.
- Real estate attorney: Contract review, title matters, entity formation, regulatory compliance
- Real estate broker or agent: Market analysis, property identification, transaction negotiation
- Land use consultant: Zoning analysis, entitlement strategy, municipal coordination
- Civil engineer: Site analysis, grading plans, utility design, drainage solutions
- Surveyor: Boundary determination, topographic surveys, ALTA surveys
- Geotechnical engineer: Soil testing, foundation recommendations, site stability
- Environmental consultant: Phase I/II assessments, contamination testing, remediation plans
- Architect: Preliminary design, feasibility studies, code compliance review
- Title company: Title search, ownership verification, easement identification
Considering a Property Acquisition or Development Project?
Have a complicated property or development project that needs focused, start-to-finish attention? Call or text Justin at 760-760-TROY, or use the website chat, to discuss whether Troy Pro's one-project-at-a-time advisory model is the right fit.
Troy Pro provides project advisory and coordination services. When a project requires licensed contracting, brokerage, architectural, engineering, legal, insurance, public-adjusting, or other regulated services, the client selects, retains, and contracts directly with the appropriate licensed independent professionals.