Land can be an excellent investment, but purchasing a lot shouldn’t be a decision you make lightly. Without thorough research and due diligence, a plot of land can turn into a labyrinth of legal fees and paperwork — or worse, entirely unsuitable for your purpose.
What You Need to Know Before Buying Land
To help ensure you make the right decision, we asked the experts for their best pro-buying tips.
1. Identify the Purpose of the Land
“Have you determined the use for the land? Is it for grazing? Will it be equestrian, or just a natural life refuge? The type of soil is critical, based on your needs.”
– Mauricio Mac Gregor, MacGregor Properties
Before you purchase land, it’s vital that you clearly determine its intended use. Whether you have dreams of keeping cattle or simply using your land as a retreat away from the hustle and bustle of life, the topography and soil type is crucial. One useful tip is to ask the current owner about the soil quality and current use of the land — this can help you determine if it’ll meet your needs.
2. Work with a Land Broker
“First-time land buyers should hire a broker with extensive experience in land, farm, and ranch transactions, which is exemplified by brokers who have attained the Accredited Land Consultant (ALC) designation. This designation, awarded by the Realtors Land Institute, demonstrates that a broker has a high level of expertise in land investment analysis, mineral rights, water rights, farm productivity, 1031 exchanges, hunting land, and other aspects of land ownership that the typical residential broker does not understand. Just as you wouldn’t ask a pediatrician to perform a hip replacement surgery, buyers should do their research to find a land expert to help them with their land search.”
– Gary Hubbell, ALC, Aspen Ranch Real Estate
Buying land can be complicated, but working with an experienced and knowledgeable real estate professional can make the transaction much easier. It’s important to note that not all real estate licensees are qualified to help you buy land. An inexperienced agent who is not proficient in land transactions could end up costing you thousands of dollars.
By working together with a land expert, you can determine the kind of property that meets your needs, what your local zoning regulations are, and how these factors might affect you. To find out more about designated Accredited Land Consultants, visit the Realtors Land Institute.
3. Utilize Your Broker’s Knowledge
“It’s imperative for first-time buyers to work with an agent that can guide them throughout the entire land buying process. There will be numerous components of the transaction that they likely have never encountered before, even in the typical home-buying process. From understanding the buyer’s wants and needs, to working with specialized lenders, surveyors, inspectors, appraisers, title companies, and more, having a knowledgeable agent will keep the transaction running smoothly while giving you the confidence and reassurance you need to provide peace of mind from start to finish.”
– Andrew Schultz. Whitetail Properties Real Estate, LLC
Real estate agents are experts in their field who can provide invaluable insight. Besides having an in-depth knowledge of the real estate sales process, experienced real estate agents also cultivate relationships with other professionals who are integral to the land buying process, such as land surveyors and lenders who specialize in land loans.
Having trusted real estate resources at your fingertips can take the stress out of the land purchasing process and ensure you don’t make any costly mistakes.
4. Read the Sales Contract Carefully
“I think that first-time buyers need to have a full understanding of what they are buying when purchasing land. This includes surveys or plats, water, and mineral rights and if it’s an agricultural piece could even include things like soil reports and production history. A good land broker should be able to guide buyers through the process by including specific terms in their offer and putting their buyers in touch with industry experts to answer technical questions pertaining to these items.”
– Robert Gash, Colorado Country Broker
Many buyers find themselves out of their depth when it comes to reviewing and understanding the legal documents involved in a real estate transaction. Land purchase agreements alone are often ten pages or more, not to mention the locale, state, and federal documents required.
Fortunately, real estate agents are far more familiar with the legal paperwork used to purchase land. Seeking the advice of a seasoned land broker can help ensure you avoid mistakes or omissions in your sales contract.
5. Check Local Zoning Regulations
“Make sure you can use the land you are buying, for what you want to use it for. Check the deed restrictions, zoning, ordinances, and laws. These will tell you everything from what you can build on your land, what you can do on your land, how many and what types of animals you can have, as well as any other limitations for the land that may be in place. Double-check to make sure everything falls in line with your intended use of the land.”
– Leslie Remy, Astra Realty
Every aspect of the land, from it’s usage to build-ability, is affected by local zoning. It’s crucial to understand how zoning regulations, restrictions, and permits might impact any land you want to purchase. The local city or county enforces zoning laws, typically to help preserve residential neighborhoods or decrease traffic and congestion.
One way to find out about your local city and council ordinances is to go online. Many jurisdictions make their entire zoning code available for view online. Alternatively, you can visit your county or municipal clerk’s office or the city attorney’s office for more information.
6. Make a Financial Plan
“First-time land buyers need to know what they are qualified to purchase, in other words, what they can afford. Having finances in order and a down payment pave a smoother road when the right property is found and the Buyers are ready to make that first land transaction.”
– Helen Dockal, Nine Bar Land & Cattle, LLC
Ultimately, your budget, and how you plan to finance your purchase, will determine the land you can buy. There are many ways to finance your land purchase, but whether buying in cash or opting for a land loan, it’s crucial to get your financial affairs in order before you start your search.
Because lenders tend to view holding undeveloped land as a speculative investment, the cost of borrowing is typically higher than a traditional home loan. Developing a comprehensive plan that details your intended use for the land can help you determine the best loan type for your needs. You’ll also have a clearer idea of your budget and what you can afford, streamlining your search for the perfect plot of land.
7. Understand Your Land Needs
“Know what you want and why you want it. Work with a broker or agent with experience in the type of property you wish to purchase and one you trust. Don’t hesitate to ask questions.”
– Jerry DeBord, Debord Real Estate
There are many different land types available — whether your dream is to own a working equestrian estate or a prime hunting location, it’s imperative to work with an agent who possesses knowledge about your area of interest.
For instance, your agricultural land needs will vary wildly depending on whether you want to keep cattle or grow crops. Working with an agent who has experience brokering agricultural deals can help you determine if the land is a good fit. Put simply; you should use your agent’s knowledge and experience to your advantage.
8. Consider Additional Costs
“If a buyer is purchasing a piece of raw land to build on, it’s important for them to understand the various infrastructure costs associated with that endeavor. The cost of water alone has become so high in our particular area that it is deterring many would-be buyers from the process. Buyers also need to be aware of potential added costs for electricity and sewer or septic systems. It’s essential to talk to your real estate agent to fully understand these added costs, if any.”
– Sarah S. Woodland, Orr Land Company
Even though raw land is typically cheaper to purchase than developed land, buyers must remember to factor in land preparation, infrastructure, and construction costs. For instance, site prep for a flat plot of land will cost anywhere from $3 to $6 per square foot, depending on where it’s located. However, a steep wooded lot that needs a lot of grading could cost upwards of $15 per square foot to prepare. Your final costs can vary wildly, depending on the type of infrastructure you need.
9. Diversify Your Investment Portfolio
“Land is a class of real estate and finite asset, which you can not build more of or replicate. Unlike the volatile and cyclical market with its peaks and troughs, there is no better time to invest in land than today. A farm and ranch broker can and should provide a buyer with confidence by helping to facilitate a smooth transaction from beginning to end.”
– Mitchell Eads, Republic Ranches, LLC
Although investing in land requires some patience and long-term strategy, there are many reasons why it’s a sound investment. Vacant land is not only an excellent way to diversify your portfolio and protect your assets against the volatility of the market, but it also has the potential to produce high returns — especially if you plan on developing it.
10. Order a Land Survey
“Whether you plan to develop it, lease it, subdivide it, or simply buy and hold it, land is a flexible, and potentially lucrative, investment for first-time buyers. To avoid any unexpected surprises, I advise clients to order a land survey. A survey will identify any easements or right-of-ways on the land and other potential issues like encroachment. Often, sellers are willing to provide you with this for free if they have one, so be sure to ask your agent to request a copy on your behalf.”
– Kirstie Hines, Premier Sotheby’s Realty
A land survey can confirm the boundaries of the plot you’re planning to buy, and identify any potential restrictions — for instance, if part of the land is a designated flood zone. It will also document the topography of the land, so you can be sure that it meets your needs and can be used as you intend. Although a land survey typically costs several hundred dollars, it could save you thousands in the long-term by identifying any issues.
11. Consider Irrigation Issues and Mineral Rights
“Is irrigation on the property an issue? Rate at 1 – 10 with 10 being the highest value. What are the domestic water and irrigation water rights for a property? What is the status to appurtenant mineral rights of the property?”
– Jack Pretti, Mason Morse
It can be easy to forget the requirements and considerations of features under the land you intend to purchase. By looking into the property’s irrigation system early on, you can potentially save money down the road on maintenance, upkeep, and potential replacement. What’s more, you’ll want to know your rights when it comes to mineral ownership beneath your new plot of land. Mineral rights can be sold or conveyed separately from property rights in the United States, so never assume that they come standard. Do your due diligence on irrigation systems and mineral rights and you could save — or even make — money down the road.
Start Your Land Search
Buying a plot of land doesn’t have to be complicated. If you do your due diligence and work alongside real estate experts, the land buying process can be rewarding — both emotionally and financially. Start looking for quality lots of land today on Land.US’s property database.