Suppose you have a development idea, and you would like to bring it to fruition. First and foremost, you need to validate your idea through a due diligence process that includes zoning analysis, market data research, financial modeling and discussions with trusted advisors to determine if it is feasible. I can't tell you how many times we’ve dreamt up some awful ideas between ourselves that we initially thought were brilliant and were saved from ourselves because of the due diligence process.
Here are the different aspects of due diligence:
Zoning Analysis: An analysis of the zoning and the land will determine the number of units, square footage, and building envelope.
Market Research: A survey of existing or in-progress projects will help you determine the potential value of your idea. You will need to know the comparable sale prices, lease rates, amenities, and locations of other projects that may be competing for the same customers.
Financial Analysis: With the results of your zoning analysis and market research, you should do a financial analysis to determine commercial viability.
Mentors & Advisors: You should also align yourself with trusted mentors and advisors and don’t be afraid to share your ideas with them. The common fear is that someone will steal your idea. While that is always a possibility, the more likely scenario is that their input will make your idea better and reduce your heartaches.
Technical studies: There are times you will want to spend time and money on technical studies during the due diligence period. For example, you may want to do a geotechnical study if there are concerns about ground stability, or you may want a biological survey to know if there are any sensitive plant or animal species.
The due diligence process helps you achieve a level of comfort before your deposit becomes non-refundable. On the other hand, the landowners will want to minimize the time needed to close escrow. The art is to balance all of those factors.