Whether you’re looking for land to build your dream home on, or you’re a real estate investor who’s looking to add valuable properties to your portfolio, purchasing vacant land can present a very viable investment opportunity.
But in order to truly maximize it, you need to know what to expect when buying vacant land and the best practices for a seamless transaction. Unlike popular misconceptions, buying land means a completely different process and requires unique considerations compared to the usual home buying process. We’ve rounded up everything you need to know to buy land in 7 easy steps to help you make an informed and wise investment.
How to Buy Vacant Land
Knowing the exact steps you need to take to purchase vacant land can help you go through the process seamlessly and successfully. It also helps increase your chances of getting the land at a good value, making for a great investment. Here’s a step-by-step guide to easily buy a parcel of vacant land.
Step 1: Engage the Advice and Assistance of Professionals
There are many complexities that are involved when buying vacant land, so it’s advisable to seek the advice and assistance of professionals. Make sure you expand your network with architects, contractors, and land surveyors who can help you make the hard decisions in your land buying journey.
It’s also highly recommended that you work with a local real estate agent who has experience buying vacant land. They can guide you throughout the entire process and avoid pitfalls, ensuring a successful sale. Engaging professionals can benefit you in several ways as they can:
- Provide valuable insights on location
- Analyze deals and prices
- Gather information about the market
- Verify plots of land
- Provide details on the area and neighborhood
- Negotiate the sale on your behalf
- And more.
Step 2: Identify Your Goals and Priorities
Buying vacant land is one of the biggest investments you will make in your life, so you shouldn’t do it impulsively. Before you even decide to make a purchase, make sure you’re well-prepared for it. That includes knowing your goals, priorities, and how you plan to use and develop the land.
If you plan on building your dream home on the vacant lot, you should also consider things like the neighborhood, location, roads, and access points. As much as possible, you want to make sure that you’ll be comfortable living in that area and that everything you need is within your reach.
Step 3: Crunch the Numbers of Your Finances and Costs
Of course, you don’t make an investment without first assessing your finances. If you have experience buying a home, you should know that the financial considerations of buying vacant land are much different.
Vacant land has a cheaper initial cost compared to buying a home, however, you should not expect to get a loan from banks or other lending institutions. Some aren’t willing to provide financing at all. And if they do, many lenders require large down payments because of the lack of a structure they can use as collateral. Further, they usually only grant a loan of 40% to 50% of the land’s value.
That doesn’t mean, though, that you have no other options for financial aid. There are traditional financing or private money options you can look into. The U.S. Department of Agriculture and Small Business Administration provide loans to help buyers purchase vacant land.
Step 4: Look for the Perfect Vacant Land
When looking for the perfect parcel of vacant land to purchase, you have a lot of things you need to take into account. Some of the most important considerations include:
- Possible investment strategies
- Your investing goals
- Location and access
- Utility services
- Neighborhood or market
Ultimately, the perfect vacant land for you would depend on your needs, priorities, and purpose, so refer back to them when making a decision about which land to purchase.
Step 5: Obtain the Required Permits
Buying and developing vacant land will require a lot of permits. You need to accomplish and submit these to comply with federal, state, and local laws and regulations. Here are some of the most common permits you may need to prepare. But it’s worth noting that particular localities may have other requirements. It’s best to study the rules and regulations in the locality where your land is located.
- Building permits: Any construction activity will require compliance with regulations and permits. Your contractor should be aware of these and can help you accomplish them.
- Environmental permits: If your land is near conservation sites or protected areas for endangered species and their habits, you need to study possible restrictions that may apply to you.
- Sewer service and water: Connecting to sewers and water lines will require permits. Some towns also have unique regulations for requesting new utility services that you need to know about.
- Special regulatory issues: If your land is located in a historical district, you may need to submit special permits to build in the vicinity.
- Zoning: Make sure your property is zoned correctly before you start any building activity. Your zoning classification will depend on how you plan to use the land.
Step 6: Hire a Land Inspector
When it comes to vacant land, it may seem like there’s nothing much to look into or study. However, there are necessary inspections you need to make to evaluate your land. Some of these are even required for permits and to comply with local regulations.
For this purpose, you will need to engage a land inspector who can help you with:
- Soil testing
- Land surveying
- Utility connections and installations
- Zoning restrictions
Conducting surveys and environmental tests before purchasing the land can go a long way in preventing headaches in the future. While the seller will have documentation of past surveys, it’s still well worth it to conduct your own.
Step 7: Make an Offer
When you deem a parcel of vacant land as suitable for your investment, it’s time to make an offer. Here, you can negotiate with the seller and discuss financing terms. A local realtor can negotiate on your behalf and increase the chances of you getting the best value for the property.
Make an Informed Decision
Because it’s so different from buying a house, the process of purchasing vacant land may seem overwhelming. But all the steps in the process are meant to protect you and your interests and ensure that you get the best value for your investment. Take these steps and follow our land purchasing checklist to make your journey easier and successful.