Property development is exciting—full of potential profits and the satisfaction of creating something from the ground up. But it’s also complex, with plenty of pitfalls that can trip you up. One overlooked detail can turn a promising project into a costly mistake. That’s why due diligence isn’t just important—it’s essential.
Think of due diligence as your insurance policy. It’s the process of thoroughly investigating every aspect of a project before committing. It’s about asking the hard questions, digging into the details, and making sure you make the right decision.
The Importance of Being Thorough
Half-baked due diligence is as risky as no due diligence at all. You can’t just skim the surface and hope for the best. A systematic, detailed approach is key. A structured checklist will be your best asset in this process, ensuring nothing slips through the cracks.
Approach every project with healthy scepticism. Instead of focusing on what makes a site attractive, challenge yourself to find potential deal-breakers. What could go wrong? What risks could derail the project? Identifying these early means you can either address them head-on or walk away before it’s too late.
Key Areas of Due Diligence
Zoning - What Can You Build?
Zoning dictates what you can and can’t build. Every council has different rules, so understanding the local planning regulations is a must. Some things to consider:
- Check if current zoning permits your planned development
- Be aware of potential zoning changes in the area
- Understand if rezoning is possible (and how difficult it might be)
- Know the density limits that control how many dwellings you can build
Legal Factors - Understanding Restrictions
A title search will uncover critical legal constraints, including:
- Easements: Areas where you can’t build (like sewer lines or access paths)
- Covenants: Additional restrictions beyond council regulations
- Encumbrances: Any claims or limitations that affect development potential
Financial Viability - Do the Numbers Work?
Property development ultimately needs to make financial sense:
- Calculate all costs – land, construction, professional fees, holding costs
- Watch for common mistakes-
- Forgetting to include taxes in your calculations
- Underestimating how long things will take
- Missing infrastructure contributions
Site and Environmental Factors - What to Look For
Physical and environmental issues can significantly impact development:
- Environmental considerations-
- Previous land contamination
- Protected plants or animals
- Heritage issues
- Site features-
- Flood risk and drainage patterns
- Availability of services (sewer, water, electricity)
- Protected trees and root systems
- Soil conditions
Getting Professional Help - Building Your Team
You’ll need experts to help navigate the development process:
- Town planners – Help with planning laws and approvals
- Local experts – Provide area-specific knowledge
- Specialists – Engineers, surveyors, and architects for technical aspects
While professionals provide valuable advice, the final decisions are up to you.
Due Diligence in Practice- It's Worth it
Good due diligence takes time and often involves some upfront costs. Paying for expert advice or detailed reports may seem like an extra expense, but it’s a fraction of what you’d lose if you rush into a bad deal.
Think of due diligence as an insurance policy. You may not need it, but if something goes wrong, it can save you from financial ruin.
You wouldn’t buy a car without a pre-purchase inspection. Why take a bigger risk with property?
The Final Word
Due diligence isn’t a formality—it’s a mindset. It’s about being proactive, thorough, and willing to walk away if something doesn’t add up. Nail this process, and you significantly increase your chances of success while avoiding costly surprises.
Property development is about taking calculated risks. Due diligence helps ensure your risks are smart ones.