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Imagine finding the perfect plot of land for your dream development project. The location is ideal, the price is right, and you’re ready to break ground. But then, you hit a snag: the utilities—water, sewer, electricity, gas—are not as accessible as you assumed. What would you do? This scenario plays out far too often in real estate development, turning promising projects into costly headaches. The culprit? A lack of thorough utilities due diligence.
In this newsletter, we’ll explore why utilities due diligence is a make-or-break step when purchasing development land. We’ll break down what it involves, why it matters, and how it can impact your budget and timeline. Plus, I’ll share real-world examples and practical insights to help you avoid common pitfalls. Let’s dive in.
What is Utilities Due Diligence?
Utilities due diligence is the process of investigating and verifying the availability, capacity, and costs of essential utilities for your development project. It’s about answering key questions:
Are water, sewer, electricity, and gas already on-site or nearby?
Can the local utility company support your project’s needs?
How much will it cost to bring utilities to the site, connect them, and cover any additional fees?
This isn’t just a formality—it’s a critical step. Utilities are the backbone of any development, and overlooking this process can lead to delays, budget overruns, or even project failure.
Why Utilities Due Diligence Matters
Here’s why skipping this step is a risk you can’t afford to take:
Availability
You need to confirm that utilities can reach your site. If they’re not already present, you might face expensive alternatives—like drilling a well or installing a septic system—which can throw your plans off track.Capacity
Even if utilities are nearby, the local system must have enough capacity to handle your project. A 50-unit residential development, for example, requires far more water and sewer capacity than a single home. If the system can’t keep up, you could be stuck footing the bill for upgrades.Costs
Utility-related expenses can add up fast. Consider these averages:Bringing utilities to a site: $9,000–$34,500 (HomeGuide)
Connection fees: $3,000 for water, $3,500 for sewer (Angi)
Impact fees: $1,000–$12,000+ depending on the region
These costs vary widely, so you need hard numbers to protect your bottom line.
Timeline
Extending utilities to your site isn’t quick. Between permits, coordination with providers, and construction, it can take months. Delays here can stall your entire project.
Real-World Lessons: When Due Diligence Falls Short
Let’s look at a few examples that show what’s at stake:
Capacity Crunch
A developer bought land for a 100-unit housing project, assuming the nearby water and sewer lines were sufficient. Too late, they learned the local treatment plant was maxed out. Upgrading it cost an extra $500,000 and delayed the project by six months.Fee Shock
Another developer planned a commercial project in a booming suburb. They budgeted for impact fees based on outdated info—only to find the fees had jumped, adding $200,000 to the tab and squeezing their profit margin.Rural Reality
A luxury resort developer snagged a stunning rural site, but it was miles from utility lines. Bringing power, water, and sewer to the property cost $1 million—unplanned expenses that forced them to scramble for more funding.
These aren’t rare flukes. They’re cautionary tales of what happens when utilities due diligence is an afterthought.
Busting a Big Myth
Here’s a common trap: assuming that utilities in the street mean you’re good to go. Proximity isn’t enough. You need to dig deeper—does the utility company have the capacity for your project? What are the connection costs? Are there hidden fees? “Close enough” doesn’t cut it in development.
How to Get It Right: Best Practices
To safeguard your investment, follow these steps:
Start with Studies
Hire experts for utility assessments—like “Dry Utility Studies”—to map out availability and challenges. Pair that with cost estimates to keep your budget realistic.Talk to Providers Early
Reach out to utility companies upfront. Get clarity on capacity and costs before you’re locked in.Know the Rules
Review local zoning, utility regulations, and fee schedules. Tools like Austin Water’s Property Profile Web Map can reveal impact fee details specific to your site.Plan for Surprises
Costs and timelines can shift. Build a contingency buffer into your budget for unexpected hiccups.Lean on Pros
Civil engineers, utility coordinators, and real estate experts can spot issues you might miss and streamline the process.
Partner with an Expert
As a licensed real estate broker, I’m here to guide you through utilities due diligence and beyond. I can help you:
Spot utility red flags early
Coordinate with providers and authorities
Budget accurately for utility costs
Keep your project on track
With the right support, you can turn potential pitfalls into a smooth path to success.
Your Next Step
Utilities due diligence isn’t glamorous, but it’s essential. It’s the difference between a profitable project and a costly lesson. Don’t leave it to chance.
Ready to start your next development? Contact me today for a consultation. Let’s make sure your vision becomes a reality—without the surprises. Contact me directly at [email protected].
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Need a roadmap? Reply in the comments section or send us an email for assistance. 360 Perspective Partners offers Professional Licensed Business, Commercial and Investment Brokerage Services along with providing Professional Licensed Community Management Services in Central Florida: https://my360perspective.com/
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