Mark Twain said, “Buy land. They aren’t making it anymore.” It was true then, and it still rings true today. Land is one of the best investments, with the holding costs on land typically much lower than existing homes, which is one of the benefits of buying and holding land until you’re ready to build. While the housing shortage continues in 2022, experts forecast a positive change occurring in the housing market, even suggesting it’s a great time to buy land. Like any year, be prepared for a competitive market. If you have dreams of building your home this year or at any point in the near future, there are several things to consider before buying land. These are just a few things to keep in mind before purchasing a plot.
Find a Good and Safe Location
Building a home involves various decisions, one of the most important being where to build. Whether it’s an area surrounded by scenic views, rural, or a cityscape, finding the right location should be a priority. It could be as simple as asking around or heading to the internet and researching some of your top neighborhoods. Keep in mind the area’s popularity; some cities experience a surge in population, which can mean more construction near your property in the near future. For most land and home buyers, the area’s safety is also a major concern. If you’re local to the site, drive by the area during the day and at night to better understand the neighborhood. You can also research crime rates for that specific city.
If the land is close to running water, an ocean, or a flood plain, the land could be in a flood zone. This is important to know before purchasing property as it will increase insurance and building costs. Depending on the municipality or county, homes built in flood zones could have increased building standards that could dramatically increase construction costs, so keep that in mind.
Raw Plots vs. Build-Ready
The readiness of the plot you choose will determine when you can start building. It is based on three categories: build-ready, raw, and unimproved. With raw lots or unimproved land, you should expect that any building won’t occur for quite some time and may require additional costs for utility hookups. Build-ready lots are ready for immediate construction with the necessary permits.
Utility Hookups on the Land
Utility hookups refer to everything from water, power, sewage, gas, cell service, and more. Lack of utilities is typically found with raw lots. If no utilities are present on the land, there can be high additional costs to add them, which can be a hassle. To check, call your local city or county planning commission and the utility companies to identify which utilities are present and if there are any fees associated with moving or adding them. Even if a utility, like water, is near, there can be added costs in moving it over to the proper location. If you’d prefer properties where utilities are already on-site, consider getting a build-ready lot.
Surveying and Land Zoning
Before getting too excited about finding the perfect plot of land, you need to make sure you can build there. The larger the parcel of land, the more essential it is to know precisely where the boundary lines run before purchasing. If you plan to install a fence or driveway, you must ensure they fall within your boundary lines to avoid boundary dispute issues. If by chance a survey has not been completed, this is another item that can be negotiated with the seller; afterward, the sale is contingent upon the buyer’s satisfaction with the survey.
Financing and Loans
Most buyers aren’t ready to pay cash for their lot, and in that case, there are a few financing options. For raw and unimproved land, raw land loans may be the best option. Raw land loans tend to have higher interest rates compared to other land or lot loans. For build-ready lots, lot loans are available, like unimproved land loans and improved land loans. Unimproved land loans sometimes have amenities and utilities. Interests and down payments aren’t as high as raw land loans, but it’s common for them to be higher than other loans. Improved land loans involve the most developed type of land. Interest rates and down payments are lower. For those looking for sites in rural areas, look into the USDA Rural Housing Site Loan. Construction to permanent loans eventually turns into a regular mortgage after completing the new build. Check with your lender to better understand your financing options, which can ultimately depend on your credit score and income.
Finding the Right Builders/Contractors
You’ve done all your research on the area, utilities, and finances, and now you’re ready to find a building company or contractors. Before hiring anyone, ask for references, check their licensing, and don’t be afraid to ask questions. You’ll want a company or contractor on the same page as you. After all, you’ll be checking in with them frequently throughout the building process.
The process of buying land to build a house can be pretty extensive. Be prepared for delays and keep in mind your budget and the timeline you expect the work done. The unexpected can happen, so be willing to roll with the punches.
Other Things to Consider Before Buying Land
Road access: The property you plan to build on must be easily accessible by public roads.
Land clearing: Some sites may come already cleared, but if the property you find requires clearing trees and other vegetation, there can be additional costs.
Zoning restrictions/local laws: Zoning will restrict the use of the property, which may set standards in the placement and size of the construction area. Before purchasing the land, look into the local laws and legal documents given by the city or state officials.
Environmental testing: Soil quality data for your potential property is important to investigate. There are cases when soil can get contaminated by natural causes or other manmade activities, such as dumping, chemical spills, and more.