The average value of land in the USA has risen by over $100,000 in just 40 years in some states. That appreciation has led investors to start focusing their purchasing efforts less on homes and more than the land that’s sitting under them.
Whether you’re thinking about buying land for investment purposes or you’re considering buying for personal use, it’s important that you get educated on land’s ins and outs before placing a bid. After all, buying a piece of land only to find out later that you can’t legally build anything on it can be a serious disappointment.
Below, our team shares down 8 tips to consider before making your first land purchase.
1. Check or Liens
A piece of land may have changed hands hundreds of times over the last century. During that time, owners may have offered special deals with people that may complicate your purchase.
For example, if 40 years ago the owner of a piece of land wrote up a contract that sold 5 acres of space to their neighbor and that information was never communicated to the county, you might buy a 45 acre plot and later find out that you actually purchased 40 acres since 5 of them weren’t the seller’s to sell.
Third-party stakes/claims to land that you’re buying are called liens. It’s important that you hire an attorney to scour all available data to ensure that liens don’t exist before you buy.
You may also want to take out an insurance policy that protects you from liens that weren’t discovered during your research.
2. If You’re Buying Land for ROI Look Into Trends
If you’re buying land because you’d like to generate a return on your investment, make sure that you monitor trends prior to making a purchase.
Many cities release plans decades in advance as to where they’re going to develop new community centers. Buying land around these areas could net you big returns when those centers come to fruition and populations migrate over.
You can also monitor whether or not certain companies are planning on moving into the area as more businesses mean more jobs, more jobs mean more people and more people drive up land prices.
3. Understand Zoning Restrictions
Zoning restrictions are one of the biggest surprises to people that have no idea about the ins and outs of buying land. Every piece of land falls under a county’s zoning regulations. Your things to do with land that you’ve purchased will be severely limited based on how a county has decided to zone your parcel.
For example, some land is zoned specifically for farming. That means you can’t so much as build a one-bedroom house on it without the county asking you to tear it down.
Know what you want out of your land before buying and ensure that local zoning laws allow you to carry out your intentions.
4. Appreciate How Land Loans Differ From Housing Loans
Maybe you imagine buying a plot of land in the country for 20% down that you can pay off over 30 years like you would a house. While that’s a nice thought, housing loans and land loans are very different.
As a best-case-scenario, land loans will require 30% down and may even stipulate that you have to build on your land within 2 years of taking out your loan. Assess what kind of land financing is available to you prior to getting your hopes up.
5. Get a Professional to Assess Your Land’s Risks
Is your land’s soil prone to mud-slides? Does your land exist in a flood plain?
It’s important to have a professional land surveyor assess the downsides of your plot so you don’t buy into/overpay for land that’s going to cause your trouble.
6. Look Into the Neighbors
If you’re close enough to your neighbors where you can see or smell what they’re doing, you’ll want to get an idea of what you can expect from them long-term.
Neighbors that are prone to being loud, building visually offending structures or run farming operations that cause poor smells may undermine your comfort and your land’s value.
7. Review Road Access
Buying land that doesn’t have freeway access is going to be a difficult sell if your intention is to try and flip your land for profit down the line. It’s also going to make getting into town much more difficult for you.
Do what you can to buy land that offers some reasonable degree freeway access or buy land that you suspect will soon be connected by an upcoming freeway expansion project.
8. Think About Utility Access
Getting running water and electricity to your home isn’t as easy as you might imagine. Depending on how rural your land is, it could be downright impossible.
Inquire with land sellers about utility access before buying. If a plot doesn’t have utilities, find out how likely you’ll be able to run utilities to your land if you want to get access later on. A plot of land that’s hopelessly cut off from things like water and electric is in almost all cases a poor investment.
Buying Land Isn’t Easy but If You Get It Right, It Can Be a Great Move
Buying land isn’t as easy as finding a plot that you like, putting 20% down and building a tiny house where you can live affordably. Due to soil problems, zoning issues and more, the process is a lot trickier.
With a little bit of diligence though, you may just find the perfect piece of land to execute your vision on at a price that’s sure to appreciate over time.
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