1. Test title

Land Development Series: Step 2

November 21, 2023

Acquisition and Financing

Before purchasing a lot of raw land, or paying for any planning documents, it’s important to create an accurate budget that accounts for the costs associated with land acquisition and development. 

In addition to the value of the raw land, be sure to get written estimates on the costs of your applications for zoning approvals (and subdivision permits, if applicable), as well as the development of site plans and any architectural work. Be sure to find out if your property will have any impact fees or environmental mitigation costs. Determine whether you are going to develop buildings and what their end use will be. Always plan in margin for delays, which are likely in a land development process. 

Once you have an estimate of the costs for development, you will need to decide how much of the cost you will need to finance. 

Land Acquisition

1. Identifying Opportunities

Research and identify potential development opportunities based on market trends, demand, and zoning regulations.

2. Financial Feasibility Analysis

Before you make an offer, conduct a detailed financial analysis to ensure the project’s feasibility, considering construction costs, potential revenue, and expected return on investment. 

3. Negotiation and Purchase Agreement

Engage in negotiations with landowners and reach an agreement. Draft a comprehensive purchase agreement outlining terms and conditions.

4. Due Diligence

During the first 30 days or so under contract, it is important that you conduct thorough due diligence on selected properties, including environmental assessments, zoning requirements, title searches, and any legal restrictions. It is also important that you confirm the availability of utilities. 

5. Securing Approvals

Obtain necessary approvals and permits from local authorities. This may involve zoning changes, environmental and other regulatory requirements such as sewer and stormwater management and utlities, among others. This step can be critical to 


1. Equity Financing

Seek equity partners or investors who are willing to invest in the project, if needed or desired.

2. Debt Financing

Secure loans from financial institutions to cover a portion of the development costs. The terms of the loan, including interest rates and repayment schedules, are critical considerations to the overall success of the project.

3. Joint Ventures

One consideration would be to form joint ventures with other developers or investors to share both the risks and rewards of the project.

4. Government Incentives

Explore whether there are available government incentives, grants, or subsidies for your commercial development project. This could include tax credits, low-interest SBA loans, or other financial incentives.

5. Pre-Sales or Leasing Agreements

Secure pre-sales or leasing agreements with potential tenants. This can provide a source of funds and demonstrate to lenders the project’s viability.

6. Construction Financing

Arrange financing specifically for the construction phase, such as a construction loan. Funds are typically disbursed in stages based on project milestones.

7. Exit Strategy

Develop a clear exit strategy, whether it involves selling the completed project, refinancing, or holding the property as an investment.

Risk Management

1. Market Analysis

Continuously monitor market conditions to adapt the project strategy accordingly.

2. Contingency Planning

Include contingency plans for unexpected challenges or delays in the development process, most importantly in the form of additional funds to cover any unexpected expenses.

3. Legal Counsel

Engage legal experts to navigate regulatory issues and mitigate legal risks.

4. Insurance

Obtain appropriate insurance coverage to protect against potential liabilities during development.

Effective land acquisition and financing strategies, combined with thorough due diligence and risk management, are essential for successful commercial land development. The collaboration of skilled professionals, including legal advisors, financial experts, and project managers, is crucial throughout the entire process.

This article offers an overview of some possibilities, and hopefully provides ideas and suggestions for consideration.


Looking to begin the process? Our commercial realty team can help! Contact us today.