Whether you want to build your dream home, start a farm, or construct the next shopping mall in your town, buying land is an attractive option. However, buying land can be complex, and there isn’t much information available on the best practices when purchasing land.
This article discusses the benefits of buying land, the drawbacks, and the most common questions to ask when buying land.
Why Buy Land?
There are many reasons why people buy land, but they mostly center around investment purposes or building a custom home to their exact specifications. Some common uses for vacant land include outdoor storage, apartment complexes, strip malls, farming, and other recreational activities.
Potential homeowners may want to purchase a finished home, but today’s real estate market makes it challenging to get their offer accepted over dozens of competing offers. This makes buying vacant land much more attractive. Additionally, purchasing land allows the homeowner to design their home from scratch instead of moving into a home with previous owners who may have different tastes in design.
Benefits of Buying Land
Buying land can be a lucrative investment. Below are some of the top benefits you’ll receive when purchasing vacant land.
- A tried and true investment. Owning land is one of the oldest investments in the world. Landowners in ancient times understood how valuable land was and started acquiring as much land as possible. Today, owning land is still a lucrative investment that provides unlimited earning potential.
- Owning land can be cost-effective. Believe it or not, buying land can be cheaper than purchasing a home or commercial property in many areas.
- Leasing opportunities. Landowners often make money from leasing their land to other people. Many farmers lease land for short or long-term periods. Developers may lease land to build commercial properties like restaurants, shopping malls, grocery stores, or movie theaters.
- Little maintenance is required. Once you purchase land, there aren’t many ongoing costs that landowners incur. Landowners don’t need to worry about leaking roofs, broken toilets, or bad tenants.
Drawbacks of Buying Land
While buying land has plenty of benefits, there are some downsides you should consider before investing in vacant land.
- Time horizon. The process of buying land can be lengthy and frustrating at times. You’ll need to ensure you comply with all zoning restrictions and have a good understanding of the zoning laws in your area. Undeveloped land may require a long-term time horizon due to the preparation and installation of utilities and plumbing systems.
- Permits. Similar to zoning restrictions, permits are required to build on the land and often require approval from the local government. You should expect to apply for permits for driveways, septic systems, and wells on your land.
- Easements. Easements allow other people or companies to use the land for a specific purpose, such as gaining access to driveways, main roads, or essential utilities. Landowners should educate themselves on the basics of easements to understand their rights.
- Large down payment. Lenders see undeveloped land as a high-risk real estate investment and require a larger down payment from the landowner. Down payments for raw land can go as high as 50 percent.
Questions to Ask When Buying Land
Buying undeveloped land can take time and effort. With all the restrictions and requirements we listed above, it can be easy to get overwhelmed by the process. However, asking the following questions is the best way to ensure you get a good deal and set yourself up for success as a landowner.
What Is the Size of the Property?
One of the most important parts of owning land is knowing how much land you actually own. Potential landowners should know the exact size of the land and any other unique features present. This may include rivers, streams, parks, and hunting areas. You should ask for a topography map to understand your land’s size, shape, and elevation.
What Are the Zoning Laws in the Area?
Landowners must know whether or not the lot is buildable and any other zoning restrictions the local government establishes. These include zoning restrictions on building height, square footage, and noise levels. While you may believe zoning laws are tedious and unnecessary, local governments intend to maintain a high quality of living for all residents. This means that zoning laws are an essential part of real estate.
What Can the Land Be Used For?
Vacant land is typically divided into three classifications: undeveloped, recreational, and residential. Undeveloped landowners have a wide array of options for developing their land. Recreational landowners may choose to build a water park, a driving range, or allow hunting on their land. Residential landowners often design their own homes or apartment complexes for investment purposes.
Is the Property Easily Accessible?
The path to the property should be easily accessible for the landowner and visitors. Some rural properties have hidden driveways or other features that make them difficult to access. Properties without legal road access may require you to trespass onto a neighbor’s property and cause problems for you as a new landowner.
What Is the Chain of Title?
Before you purchase land, you need to know who the current owner is and that there is a free and clear title. The title can get clouded when the original owner dies and doesn’t specify a new property owner in his will. The best way to ensure a free and clear title is by conducting a title search with Leading Edge Title.
Is There an HOA or POA?
Some developed pieces of land may be in a homeowners association (HOA) or property owners association (POA). These could have their own rules and requires an annual fee to remain in the association. Landowners should also be careful when purchasing parcels that may have unpaid HOA dues that the previous owner neglected to pay.
Buying land is one of the best real estate investing strategies available today. It’s an alternative real estate investing method perfect for those who want a custom new construction home or build commercial properties that generate consistent cash flow.
As we mentioned, one of the most essential parts of buying land is ensuring a free and clear title. The only way to do so is by working with a reputable title agency like Leading Edge Title. Schedule an appointment today to see how we can help you buy the property of your dreams with high-quality title services.