Guidelines for Purchasing Vacant Land

It's important to confirm your ingress and egress rights.

It's important to confirm your ingress and egress rights.

Whether you're looking to buy a piece of land for a retirement home, family vacation home, or to build the perfect house for yourself, buying land is an excellent way to do it. However, you're also taking on a big project. Land that has buildings on it has already proven that it can support development. With raw land, you have to figure out how it can be developed, if at all, from scratch.

Test. Test. Test.

There's an old adage that the three secrets to real estate are "location, location, location." With land, what's really important is to confirm that you can build on it. A soil compaction test determines if the ground can support the weight of your building. You may also need to do a percolation, or perc, test to confirm that the ground can absorb water. Perc tests are especially important if you need to build a septic system. You can also investigate your land's history or have an environmental survey done to ensure that nothing dangerous or poisonous is in your ground or water supply.

Confirm Your Rights

When you buy land, you also should be buying the rights to do certain things with it. Many parcels of land are land-locked, meaning that they don't have access to a public road. If your parcel is land-locked, make sure that you have the access rights you need over someone else's land. If if doesn't have ingress and egress rights, it can be very expensive to negotiate them. While you're looking into the land, confirm what its zoning will allow. A property's zoning determines what you can build, how tall or large it can be, and how far it needs to be from the property lines. If the zoning in place doesn't suit your needs, it can be very hard to change.

Get Plugged In

Before buying the land, make sure that it has access to utilities. The best choice is to have every necessary utility stubbed to the property line so that all you need to do is to connect to the line and bring it to where you build. If the nearest electric line is one mile away, it can be very expensive to bring a line in or to install your own off-grid generating capability. If you do not have ready access to water or sewer, you will need a well and a septic system, and if natural gas is not available, you may need to find an alternate energy source like propane or wood pellets.

Paying for It

When you buy a piece of vacant land, you need to find special financing. Some lenders offer construction loans that you can use to buy the land and then finance the cost of constructing your house. If you're looking to hold the land, financing is usually harder to come by. Your best option might be to have the seller finance the purchase for you. However you finance the land, you will have to make payments on the land as well as property taxes, without being able to use it until you build on it.

Fast or Slow

When you buy a piece of land, it's best to either develop it quickly or to plan on holding it as a long-term investment. When you develop it quickly, you should be able to lock in the construction and material prices that were in place when you closed on it. If you buy it now to build in a few years, you could end up with a nasty surprise if the price of lumber or some other commodity increases. On the other hand, if you buy to hold for a long time, construction prices are less of a factor. On a long-term hold, you're buying the land to lock it down now for expected appreciation or development in the future.


About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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