6 Ways to Improve Your Due Diligence Checklist

Customizing Site Evaluation for Residential Development

As a site civil engineering professional in the land development industry, here’s what I know to be true about due diligence: The process is as much about being thorough as it is about being methodical.

From title and zoning research to site investigations and feasibility studies, developers have a lot of key areas to cover in a short period of time. One way developers can feel more confident in evaluating a property’s development potential in 30, 60, or 90 days is to create a systematic approach to the research process. Enter the due diligence checklist.

While the main tenets of due diligence hold true for every project, the standard checklist changes based on what’s being developed. Ultimately, a project’s use prioritizes checklist items and determines how certain information is evaluated.

This is particularly true in residential development, where construction costs are rising, and material supply is in high demand. Evaluating factors unique to this market can help residential developers establish more realistic budgets and schedules, and most importantly, help developers to make more informed project decisions.

For residential development, consider making these six modifications to your standard due diligence checklist:

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1. Add ‘Affordability Requirements’ to the List

Nationwide, many cities and towns require new multifamily residential developments to dedicate a percentage of units for subsidized rent. Because of these requirements, many developers add units to the original plan to account for the lost rent income. In other instances, developers have waived or reduced the affordability requirement through rezoning.

Reviewing the jurisdiction’s affordability requirements during due diligence enables developers to strategize about unit numbers, possible rezoning opportunities, and project profitability goals.

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2. Double-Down on Utility Research

Often, prime property for residential development is located in underdeveloped areas. As a result, there’s a greater probability that utilities are not readily available and lengthy (read: costly) extensions to the nearest public connection may be required.

In addition to determining utility availability – a standard due diligence element – understand the extent to which these utilities must be extended, along with any offsite improvements that the municipality may require. Examining utility connections beyond availability may be a critical component to evaluating the property’s development potential and projecting costs and schedule early on.

3. Strategize Site Layout Through the Filter of Your Target Demographic

Factors like the type of residential product being developed and amenities your target audience is looking for will impact your due diligence considerations and site layout.

Density & Development Viability in Single-Family Developments

If targeting first-time homebuyers, a site plan layout with starter homes in the same style will yield a much different lot count than a neighborhood for mid-level homes with several models to select from, and may vary more from a luxury home community with expansive lots.

In developing feasibility studies and conceptual plans, focus on the desired market and work with your design team to balance density with the appropriate sense of place and neighborhood feel.

Basements, or Lack Thereof

If the proposed residences include basements, the design team will likely run roadways along the ridges and high points of the site. This allows the backyards to grade down and naturally create more walk-out basements.

Where basements are not needed or desired by the target market, the design team will lay out roadways through the valleys, allowing the yards to naturally drain forward toward the road for easier stormwater management.

Both methods endeavor to use the natural grade to accomplish the desired goal, and ultimately minimize earthwork. If the decision to include or omit basements changes in later stages of development, it could mean redesigning the site. Focusing on the target demographic in due diligence and conceptual planning, therefore, could prevent costly redesigns.

4. Evaluate Topography Based on the Residential Product Type

Earthwork is one of the most expensive elements of a project. Consequently, investing in conceptual grading is a critical step in understanding a project’s development potential and controlling costs.

When determining the most effective grading approach, your design team will focus on balancing the site and leveraging the existing dirt to minimize costly import and export fees. Your site civil engineer will evaluate earthwork and topography differently depending on the type of residential community being developed. For example:

• In single-family communities, allow the layout to roll with the land. The homes can be set at different elevations, and there is more freedom to incorporate natural features.
• For townhome developments, your site civil design team can work with the architect on different foundations and configurations of the buildings. (E.g. A building could have a first-floor entry at the front and then drop off in the back to a walk-out basement, while the next building could be situated on a flatter elevation.)
• Single-family build-for-rent communities often require ADA-like measures for sidewalks and roads. This makes it more challenging to accommodate drastic grade changes, which will require a more robust earthwork strategy.

5. Determine Roadway Code Requirements

Looking strategically at roadways and efficient circulation design may be an effective way to forecast and control costs, making roadway evaluation a key due diligence checklist item for residential developments.

The creation of new roads, and the process of connecting to existing roadways, generally requires traffic studies and could cause the developer to incur jurisdictional fees. In due diligence, determine the number of looped roads and access points the applicable code requires. From there, work with your design team to evaluate whether additional entrances or roadways are necessary. If budget is a factor, avoid incorporating non-essential entrances and roadways.

6. Explore Opportunities to Leverage Natural Elements

In your environmental due diligence, encourage your design team to look for opportunities to incorporate existing site features such as trees, ponds, lakes, streams, or wooded areas that can add unique character to the community. Wetlands, for example, can be used as an amenity, or for stormwater management in some areas.

Evaluating environmental factors differently could turn potential cost implications into value-adds that create a more desirable product for future residents.

Keep the Momentum Going

Once due diligence is complete, spend time evaluating your conceptual plans. Consider engaging your general contractor and landscape architect to help you identify additional cost-saving opportunities.

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Stretched for Time?

When time is limited and the risks are high, take a systemic approach to due diligence. A customized due diligence checklist specific to the nuances of residential development will empower you to manage the research more efficiently.

In addition to a dependable checklist, elevate your due diligence findings with support from Bohler’s planners, site design, and permitting professionals. Our experienced teams routinely lead the process and augment in-house capabilities so developers can make more informed decisions about a project’s development feasibility, scope of work, and budget.

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