10 Due Diligence Tasks for Successful Land Acquisitions
We’ve been investing in land for over five years.
During that time, we’ve completed over 250 deals and have consistently earned double digit returns for our investors. Much of this success stems from the processes we've built around acquiring the right properties for our fund.
But I’ll let you in on a secret…it’s a system.
We use the same 10 due diligence tasks every time.
Task #1: 5-Minute Due Diligence
When a lead comes in from our marketing efforts, we do a quick assessment of the property before speaking with the seller.
Here’s what we check:
Satellite imagery
Road access
Flood zone, wetlands, and topography maps
This quick review gives us a sense of the property's general characteristics and results in an informed conversation with the seller.
Task #2: Check for Liens or Violations
We uncover any issues affecting the value of a property.
Here’s who we check with first:
County Recorder for deeds of trust, mortgages, or liens
County Treasurer for back taxes or liens
Property Owners Association, if applicable, for unpaid dues or liens
Development Services for land use or zoning violations
Quick note: Liens often attach to the property, so we review these in detail.
Task #3: Determine Comparables
The next step is determining market comparables.
We review different systems to evaluate:
Lowest market comps
Most likely market comps
If the property is a candidate for subdivision, comps for all constituent parcels
At this point we have an initial sense of the property and its value. Now the real work begins.
Task #4: In-Depth Imagery and Map Review
We complete an in-depth review of satellite imagery and maps across five different systems to:
Reconfirm road access
Reconfirm flood zone and wetlands findings
Review the condition of neighboring properties
Review the zoning and topography to determine the feasibility of a subdivision
This serves as our view of the land until we get boots on the ground later in our process.
Task #5: 88-Point Full Due Diligence Package
Next, we complete a full due diligence package, with 88 separate line items, to review every aspect of a property we're considering. Just a few of these include:
Elevation
GPS coordinates
Setbacks
Building restrictions
Local utility providers
At this point we're closing in on understanding all aspects of the property under consideration.
Task #6: Review Land Division Regulations and Processes
If a subdivision offers the highest and best use of the land, we'll gain a complete understanding of the local jurisdiction:
Research the subdivision process, timeline, costs, and barriers to approval
Vet local surveyors and engineers
Obtain quotes and lead times
This process informs the feasibility of a subdivision and solidifies our strategy for exiting the property, whether through a subdivision or repositioning.
For more detail on this process, please see Creating Value with Subdivisions or The Ultimate Guide to Minor Land Subdivisions.
Task #7: Boots on the Ground
Satellite imagery doesn't uncover everything, and it's important to get eyes on a property.
We have at least one of the following local partners visit each potential acquisition to provide a report, photographs, and video:
Drone photographer
Realtor
Surveyor
We equip our partners with an interactive map that shows their location alongside the property boundaries, right from their phone. This ensures we're getting accurate information, photographs, and video.
Task #8: Confirm and Test Utilities
We confirm initial utility findings to ensure accuracy. Depending on the property, this may include:
Calling electric, water, sewer, phone, and gas companies to ensure service
Testing wells
Testing septic systems
Conducting soil percolation tests
This provides a thorough understanding of the level and quality of services to a property, which directly impacts its value.
Task #9: Revisit Comparables and Renegotiate
Once we have all information about a property, we do a final review of market comparables:
Review comparable reports in light of information discovered during due diligence
Renegotiate with the seller, if appropriate
Renegotiating is critical if due diligence uncovers information that negatively impacts property value.
Task #10: Review Title Report
In this final step, we review the title report to ensure there are no additional issues concerning:
Chain of title
Liens
Access
Easements
These are the 10 due diligence tasks we've used in each of our 250+ deals to ensure we're acquiring the right land for our investors.