Understanding What a Successful Land Development Process Entails
Developing buildings and structures on raw land is a profitable venture that can significantly increase any construction firm or land developer’s investment portfolio. Whether the land development project is raw land development or a newly proposed development project, there are a variety of best practices and due diligence phases that should be followed when the development project falls under the umbrella of:
- Greenfield Development
- Brownfield Development
- Infill Development
Land development projects include residential structures, commercial buildings, multi-family dwellings, and industrial buildings. The construction and development process for any of these structures is preceded by a critical series of planning and design steps that encompass the entire land development process:
- Planning & Design: The first phase of the land development process includes a Feasibility Analysis, to determine a project’s viability, and Entitlementwhen permits and approvals are received from the city.
- Construction and Development: The creation of physical structures on a parcel of land, including:a) Rough grading
b) Wet utilities
c) Dry utilities
e) Walls &fencing
f) Finish grading
The entire process begins with analyzing the market, identifying land that will return a positive ROI, carrying out a series of analyses, obtaining the necessary permits and entitlements, and developing the land accordingly.
Identify Land That’s Appropriate For Your Denver Development Project
The first significant phase in the land development project process is to identify land that can turn a profit and carrying out market research with a feasibility analysis scope. This financial and practical analysis is used to determine whether the project is projected to be profitable within a given timeframe. Included within the scope of the analysis is a series of research evaluations, including:
- Area/location growth [this refers to population density, projected population growth, etc]
- Zoning Codes
- Permitting and Construction Timelines
- Nearby Amenities and Engineering Infrastructure
- Storm Sewers
- Telephone and Fiber
- Lot Width
Understanding the intricacies of an intended land development are essential to committing to a project – or making necessary changes to make it practically and financially viable.
Evaluate The Local Zoning Codes
Zoning Codes are local legislations that determine what types of structures can be built in which regions of the city, that is, within certain zones. Typically there are five major city zones within a municipal center or system, all of which are (by law) capable of containing different building structures of different densities:
- Residential Zone
- Commercial Zone
- Industrial Zone
- Institutional Zone
- Open Zone
To know whether your firm will be able to build your proposed structure on this chosen parcel of land, and for your construction project to proceed, you will require a series of land development entitlements, which will be issued in accordance with local zoning codes.
Conduct Environmental Testing
As a part of the pre-development stage, you will need to order a series of tests to determine if the parcel of land is fit for development and free of contaminants. Such tests are required to obtain a land entitlement. One of the more critical analyses is an Environmental Site Assessment (ESA). Other requisite reports include a soil report, a biological survey report, and an Environmental Impact Report (EIR), among others.
The most critical of these, the ESA, looks for hazardous contamination of the land parcel. Simultaneously, the soil report includes tests of soil contaminants, microorganisms, liquid absorption rates, groundwater depth and flow and the presence of septic or storage tanks (and their potential contaminants). The soil report will also include information used for grading, building design, structural form, and foundations.
Determine Financial Feasibility
Conducting a thorough financial feasibility analysis is one of the core steps to a successful land development project. Evaluation ensures you embark on a land development project that is going to be financially successful.
Cost of The Land
Calculating – and negotiating for – the upfront land cost is essential in analyzing the overall financial benefits – or drawbacks – of a land development project.
Cost of The Development
After the cost of the land, the cost of the development process itself is most critical. It includes hiring construction and legal specialists, consultants, and contractors, along with the costs of every construction phase necessary to complete the project. Development costs are more than just “building”: they also include soil analysis, demolition of any existing structures, site grading,, tree removal, excavations, city-required improvements to public space and more.
Undertaking a comprehensive analysis of the real estate market is vital to ensuring that your project can turn a positive ROI in the future and that your money, time, energy, and resources aren’t wasted.
- Market research should include four essential qualitative and quantitative research factors:
- In-depth interviews with stakeholders in the industry and area
- Demographic trends
- Competitive analysis of similar properties in the market area
Market research can help you obtain investor funding and help your team strategically identify additional targets and highlight potential gaps in your overall strategy. A market research analysis used in conjunction with a full feasibility study can cover all aspects of the project, revealing solutions to problems, potential obstacles, and financial projections for the real estate market.
ROI projections are created using a thorough market analysis and determine if a land development project will work, financially and practically, given the trajectory of the real estate market. The potential ROI is an indicator of whether the project will produce returns on investment in a future market.
Obtain Required Financing
Once a thorough analysis has been carried out for all costs associated with land development for your project, it is time to obtain money to finance it. While there are the standard methods for funding such a project – including private loans and bank loans – there are other methods that can be used for financing, such as:
- Specialist Finance Lenders
- P2P Lenders
- Property Development Finance
- Secured Loans (Second Charge Mortgages)
- Bridging Loans
The ultimate goal is to obtain financing for the construction project per the projected financial feasibility analysis.
Purchase The Land
Purchasing the land is step one. Once this is complete and the developer has legal rights to the land, a developer can move forward with acquiring permits and entitlements for the project.
Obtain The Necessary Entitlements
Obtaining the pertinent entitlements is often a lengthy process requiring in-depth knowledge of local legislation. An entitlement is a legal document that gives a developer the right to build specific structures on a parcel of land if the structure’s intended purpose aligns with local legislation. While there are numerous entitlements and permits, a land-development real-estate entitlement is the most critical document that gives a developer permission to develop on a parcel of land.
Begin Construction of Development Project
Before the building construction phase begins, there may be some utility development required (i.e., to install, remove or improve sewage, water, and storm systems) or the need to remove vegetation from the site. Site grading may also be necessary to ensure correct slopes and elevation.
Successful Land Development in Denver Requires Careful Planning and Attention to Detail
It is critical for developers to plan carefully, following through on each of these phases align with land development and construction best practices. Attending to these details will help eliminate future issues and problems that could cost a developer thousands of dollars (upfront or by reducing ROI), and prevent delays and other developmental obstacles.
The first step in creating a successful development project is planning, which requires careful attention to detail and conducting all the necessary analyses efficiently. When an effective strategic planning system underlies your land development project, it is possible to build and develop successfully in Denver.