Due Diligence for a Development Site
Buying a site for development is a major financial commitment. While the rewards can be high, the risks are significant if you fail to conduct proper due diligence. This blog outlines the key professionals you should engage before you buy, what they do, what they cost, and what can go wrong if you skip their advice.
As with any good advice, it is hard to quantify its value as it often is preventing you from overspending or making a mistake. However, we too often see people who haven’t had good advice and can’t recommend more highly engaging with professionals from the start to help avoid a big loss and make informed decisions.
Consultants
We have split Planners, Architects and Engineers into separate categories under the overall title ‘Consultants’ this is so we can discuss the particular role each of these play in property due diligence. There are companies out there that provide all these services in house which can be more cost effective than engaging all of these consultants independently.
Planner / Surveyor
Estimated Cost $500 - $2,000
A surveyor helps measure and map out the land to determine the exact site dimensions and legal boundaries. They can help decipher any discrepancies between the certificate of title and physical property and point out potential no-build zones such as protected trees.
A planner interprets local council zoning rules and district plans. This is crucial. A planner will assess what is permitted on the site regarding what you can build and what the property can be used for, identify overlays (heritage/ character areas, flood risk, land slips, protected trees) and guide you about more specific resource consent requirements such as minimum setback and height in relation to boundary. In short, they will give you the best idea about what may be built on the site and therefore directly impact the sites feasibility.
Without a planner, you may discover that your development is non-compliant, requires major changes, or faces community opposition. This can delay your project, increase costs, or even prevent it from going ahead.
Many planners may offer a quick site assessment for as little as $500 - $1,000, a small amount of money to spend to save on making a big mistake.
Architect / Draftsman
Estimated Costs: $1,000 - $25,000+
An architect or draftsman provides concept and preliminary design advice to help you understand the site’s development potential. They can design around planning constraints and create layouts that optimise yield, natural light, and appeal to buyer preferences. Later, they produce full plans for building consent.
Skipping early architectural input might mean you miss key opportunities or design something unfeasible—only to find out after you’ve purchased the land
Civil/Structural Engineer
Estimated Cost: $3,000 – $10,000 + GST
Engineers assess the feasibility and cost of infrastructure works. Making sure utility connections (like wastewater, stormwater, power, gas and fiber) have connection points and are readily accessible. They ensure the development complies with the NZ Building Code and is safe and fits within the local council network capacity.
Without proper engineering advice, you may underestimate infrastructure needs or discover hidden constraints such as services requiring significant upgrades, such as transformer upgrades, stormwater upgrades or neighbours unwilling to allow services connected within their site. This can cause major budget blowouts and, in severe cases, affect the number of units built or even the overall feasibility of the development.
There are companies out there that can do planning, engineering and surveying. We partnered with Civix to undertake our Development Consent Guide found here.
Real Estate Agent
Estimated Cost: A Phone Call or Coffee
Everyone knows what an agent does. However, it is important to discuss with local agents in the area to find out key information. Good questions to ask are:
- Who are the buyers in the area? (Young Professionals, Families, Downsizers or Investors)
- What is the typical topography of houses in the area? (Apartments, Lifestyle block, Land & Build Package)
- Is the local area dominated by renters or owner-occupiers?
- What is selling well in the area?
- What stock is not moving?
- How much interest is there in off-the-plan sales?
These questions help in learning a particular area but also can give guidance with your planner and architect. Without this you might find that they operate with scope not well suited to the area thus resulting in a development that isn’t best positioned to succeed.
It is also important to speak with the right agent, agents like most professionals, can specialise in certain areas, types and values of homes and will market properties different ways. If you are developing, we highly recommend speaking with an off-plan sales agent who specialises in that space. They will be able to give you good advice around how to sell and market the product before and during construction, what prices you can expect off plan (often different to completed homes) and importantly will understand the nuances of contracting these properties in a suitable manner for a funder.
For more about pre-sales and what an agent may be able to help you with check out our blog here.
Quantity Surveyor
Estimated Cost - $1,000 - $30,000 (scope of work and project dependent).
As development finance brokers we see a different feasibility study every day. Some of these are done quite well and some not so much. Developers who are familiar with the industry and regularly undertake projects are often able to put together robust feasibilities for projects which are often the cornerstone of making a buying decision on land. Once you have established what you can build on the site you want to know how much that is going to cost you to determine what a fair price for the land may be and if there is enough return to warrant the risk.
If you are inexperienced then often prospective developers may miss costs, underestimate costs or even sometimes overestimate them. All of these can have material impacts on the project and lead to a bad decision.
Engaging early with a QS to undertake a quick feasibility study for a project may cost you $1,000 - $2,000 but can save a bundle long term. A QS will be intimately familiar with how much it is costing to develop property and give you an accurate steer as to a project cost ensuring you make the best informed decision.
Further, good QS firms can help advise and guide the architect to value engineer designs to ensure these meet a budgeted cost and then tender build contracts to ensure best price and form of contract. For most well established developers a QS can be an integral part of their team.
Property Lawyer
Estimated Cost: $1,000 – $3,000+ plus GST
Your lawyer reviews the legal title, checks for covenants, easements, and caveats, and advises on any restrictions or risks. They also help structure the purchase entity and navigate sale and purchase agreements.
Restrictive covenant - is a legal obligation registered on the title that can limit what a potential developer can do on their land. For example, to prevent a development from blocking their view.
Easements- give the right to someone to use your land. This could be an easement giving a right to a neighbour to use your driveway to access their property.
Caveat - a legal notice over a property that can prevent a sale or mortgage on a security until the caveat holder approves.
Buying without legal advice can expose you to hidden liabilities or restrictive covenants that limit your development. A lot of this information can be found online utilizing tools like Relab and you may be able to do some title checks (as well as looking at a LIM) as part of your initial due diligence, however, before finalising a purchase you should be speaking with a lawyer.
Development Finance Broker
Cost: 1% of the Loan Limit on drawdown of the facility (i.e. based on success).
A finance broker acts on your behalf, matches you with the right lender, negotiates terms, and helps structure the loan for your needs. Brokers can also assist clients who are doing repeat projects and need to maintain enough equity across a wider portfolio to meet future financial commitments.
Going at it alone can lead to unsuitable loan terms, undue influence from funders, missed opportunities, and poor pricing for a loan.
It is crucial to ensure you work with a broker who is familiar with development finance, the breadth of lenders in the market and the structure and pricing they offer. Not all funders are suited to all deals and having someone to help you navigate that space as well as structure your project best to fit the markets criteria goes a long way.
In the Due diligence phase a development finance broker will help with guidance around possible funding structures, equity requirements and other risks you may need to address for a lender. Engage with one early.
Final Thoughts
Each of these professionals plays a unique role in protecting your investment and ensuring your development is viable, compliant, and financeable. Skipping due diligence may save money in the short term, but it can cost you far more in the long run and as Benjamin Franklin said “By failing to prepare, you are preparing to fail”.
Our team of experts can connect you with trusted professionals and guide you through this process. —reach out to get started.