Land Due Diligence Process

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Critical Items

  • Comps - This is the critical indicator for revenue from a build, though we may find that comps are not important - ie, our model remains robust under all conditions. Robustness (under all conditions where others would not dare venture) is the ideal outcome, and we are shooting for robustness to the level of build feasibility under all conditions. Including ghetto, where we have means to manage risk and control costs via model flexibility: such as using local labor, volunteers, and stone soup in general while empowering everyone. while our model should work anywhere, we need to get an idea prior to building so we can be testing revenue outcomes, not guessing. If we can calculate a predicted value, this helps us guide the cost structure and decisions during the build. We have more focus, as opposed to 'let's see what happens'. We are thus testing our ability to obtain specific outcomes.
  • Power Connection - cost of hookup. Cost of system components before Service Entrance.
  • Sewer/water connection - cost of hookup. Cost of system components (possibly septic).
  • Flood plain - what is the added cost of flood insurance? $1000 average per year [1]. FEMA GIS flood map online - [2]. Flood zones defined - [3] and [4]. [5]. Ex - if a slight risk, what is cost?
  • Impact fees - if present, can affect cost significantly
  • Title - Clear title, easements, etc.

Sample Contingency

  • We are interested pending buildability, title, hidden costs (infill, remediation, flood), and comps in the area for financial planning:
    • Comps for the area for similar housing, or starter homes in the 1000-2000 sf range
    • If multiple house lot - pending division. If dividable, can we build now and divide later?
    • Contract: Contract is contingent upon discovert of hidden costs that raise construction costs significantly - such as:
    • Electrical, water, and sewer connections must be available at the lot without excessive connection costs such as street cut or power line extension, etc
    • Impact fees cannot add significant cost
    • Soil must be suitable for construction and not requiring excessive fill or replacement of soil, or location in flood plain preventing construction
    • Title - clear title

Case Study - First 3 Lots