How to Buy Land for Real Estate Investing
If you’ve ever done research on purchasing a house, it may not be a bad idea to look into buying raw land as well. There are certainly drawbacks and benefits to both choices, but if you’ve ever wanted to build a house either for yourself or to resell, then learning how to buy land instead of a home might be a great alternative.
Provided of course, that you do your research carefully.
How to Buy Land:
One of the most important things to do before you even begin your research is to figure out what you’re going to use the land for. Remember that while raw land is much cheaper than buying a house, unless you plan on renting it out, the land will not generate any income while you decide what to do with it.
There are several common reasons that people buy raw land, which include farming and livestock, building a home, investment in developing a future area, and to help diversify one’s portfolio. Deciding what you will eventually do with the land will make it easier to find the land you want, and can even make it easier on you if you plan on getting financing or a loan.
One of the good things about learning how to buy land is discovering that while everyone needs a home, not everyone needs an empty bit of land – thus making generally fewer potential buyers and less competition for you while you’re in the market. Of course while this can be very good news, this is also something to be wary of. If for some reason down the line you realize that this investment isn’t for you, you may have trouble selling it yourself; and because lenders know this, they often ask for higher down payments and loan rates to finance land purchases. To help offset this, many land investors pay with cash.
So you’ve finally decided what you’ll use the land for, and you’ve even got your eye on a nice piece of raw land out in the country. Now what? Next in your research in how to buy land should be to really investigate the land you have your eye on. There are several things to be on the lookout for and to be up to date on for the property you want:
Zoning Requirements: Every plot of land must follow the zoning requirements set but the local government. This is especially important if you want to build a home to custom specifications – some counties don’t allow construction on smaller parcels of land. It might also be a good idea to ask about future zoning, whether there are plans to build shopping centers of other large buildings, or to change the uses of the nearby lands. Any such changes could result in a devaluing of your own land. Requirements such as these also mean acquiring permits. You will need permits almost no matter what you do, and the property itself may already come with permits attached to it. So be sure to check their expiration dates before doing any construction.
Surveying: Surveying helps you to know the exact boundaries of the property. Also make sure the last survey was recently, as land can shift and boundaries can change. These records can be easy to dig up, though it may be a good idea to have your own survey done, just so nothing is missed.
Easements: Surveying the land can be especially useful if the land has no public access road, or can only be accessed by driving across an adjoining plot of land. An easement is basically permission for others to trespass on a property they don’t own, and it’s mainly used for roads; but can also be used for cable and phone companies to bury wires on their property. Getting an easement recorded and acknowledge is important to keep access to your property open. Obtaining title insurance can also keep the easement from being disputed in the future.
Utilities: Perhaps one of the most important things to research about the land you want is its access to utilities. If the property is further out in the country, you may not be able to connect to the local water and sewer lines. If this is the case, make sure you can dig a well, and find out how expensive it would be to install a septic system. The same can be said for electricity, cable and telephone lines. If a property is not already established with these lines it can be expensive to connect to them. A generator for back up during power outages can be a smart investment as well. And remember that a lot of these decisions will require permits.
If you’ve done your research on how to buy land and are sure it’s what you want, than buying raw land can be a great investment. But always keep in mind, that while cheaper and with less maintenance than buying an already built house, there are still a lot of factors to remember that could turn your great investment into a poor one without the proper research.
If you are interested in accessing a large inventory of land parcels, check into Tax Delinquent Properties. Here are some examples:
1. I know someone who purchases tax delinquent property before it goes to tax auction for literally pennies on the dollar and sells these lots on eBay. He prefers waterfront lots, by the lake or river.
2. Another investor buys camper lots and sells them owner financing on contract for deed – he pays at the most $100, including recording fees, and sells them anywhere from $2,000 and up.
3. Another investor buys lots from the City in redevelopment areas for $1 and builds new houses using grants from the local government.
There is a lot you can do with land – learning how to buy land at high discounted prices (or even free – land is given away free all the time, especially going to tax sale,) it is a very smart strategy for any real estate investor.
Check out this webinar I have on Tax Delinquent Property.