Many companies are looking to expand their outreach by building new facilities, but first, they must choose where to build. How do you buy land for a business?
Buying land for a business requires extensive research before purchasing. Many areas have zoning restrictions and building requirements, and some offer tax incentives to attract new development. Assessing utility connections, accessibility issues, and surrounding business is also a must.
As a business owner, you know that there are a zillion things to figure out before purchasing any land for your operation. There are zoning requirements, accessibility issues, and even tax rates to ponder, as well as environmental impacts and neighboring businesses to consider. While this might seem overwhelming, it can be an even more enormous headache for any business owner who doesn’t do due diligence on any property they are considering.
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What are Some Things that Need to Be Researched?
There are pieces to the puzzle that need to be fit into place before approaching a lender or investing in a land purchase.
Is the Land Located in the Right Area?
Location is the key to any business. You want to make sure that the piece of property you are planning on building is accessible to customers and employees. If your business depends on a steady flow of customers pulling through the drive-up or entering through the front door, you need a location near a heavy-traffic area. A local rural area close to a highway is more advantageous if your business is manufacturing. If you plan on using shipping or rail lines to transport your product, be sure to allow for space to do so. The last thing you want to do is open up a business but not be able to get your product to the market where it is needed.
Is the Land Going to Meet Zoning Requirements?
Many areas have zoning requirements that must be met before any factory or business can be constructed. You cannot open a Subway franchise if the property location is zoned for residential. It can save a lot of money by familiarizing yourself with the local zoning codes before considering a piece of land to purchase.
Is the Condition of the Property Adequate?
There needs to be a determination about the condition of the property. If the previous owners had trouble disposing of hazardous chemicals, there might be land or groundwater issues, not to mention EPA cleanup costs. Can existing buildings be converted or adapted for use, or do they need to be torn down? Do existing buildings have asbestos, lead paint, or toxic mold that will be removed before establishing your business? A good inspection of any existing structures can help prevent many potential problems.
Another consideration is to assess the slope of the land before building. Is the land suitable for the business, or does the water tend to drain into your property every time it rains? Does the property need to be graded or prepared before a parking lot or building can be erected? If there are existing conditions (like being in a flood plain), these issues could affect property insurance expenses.
Is the Property Accessible?
There are many government regulations about accessibility for Americans with disabilities. These rules apply not just to customers but also employees. An ADA expert can help evaluate existing buildings or architectural plans for compliance, and many municipalities may require it before approving building permits. The last thing you want to do is have to pay a fine or undergo a lawsuit because you didn’t plan for these kinds of issues before you purchased land and built a structure.
As you might suspect, traffic flow is also an important consideration. If employees are going to clog up the nearby highway as they arrive to and from work, the location might not be the best. In addition, if customers need access, can they enter and exit your property without causing traffic issues or accidents? The last thing you want is for a customer to get rear-ended while trying to make a turn into your facility.
Accessibility issues apply to neighboring businesses or homes as well. Many businesses build without thinking about how difficult their neighbors' lives will become due to the presence of a new business. Will your factory emit odors that might affect how neighbors live? If you are purchasing land for a restaurant, you might want to build something other than the tire factory. It is essential to be a good neighbor, regardless of the kind of business you have. Remember, those good neighbors who like your business can be a great source of driving revenue to your door.
Is the Property Close to Emergency Services if Needed?
While no one wants to think about worst-case scenarios, it is crucial to assess the availability of fire hydrants and needed services should a disaster arise. How far will the fire department have to travel, or will they be able to hook up to a hydrant if there is a fire? Will medical facilities be close by? What kind of security will be needed for your business? Will checkpoints or fences need to be built to keep out unwanted guests?
Is the Property Able to Accommodate Future Expansion?
Many business owners dream of expanding their business plans. If your property doesn’t accommodate your hopes for expansion, it may not be the correct location. Is there room for additional building construction or parking? Knowing how much space you have to breathe before moving is essential should your business take off.
Is the Business Going to have an Environmental Impact?
Depending on what kind of business you are planning to have, an environmental impact study is always vital for legal issues. Will the plant generate wastewater that needs to be disposed of? Are there harsh chemicals that cannot be flushed down existing sewer lines? Are there wildlife restrictions that prevent building or paving over natural habitats? The neighbors will object if your factory pollutes the ground water they have been drinking for years.
Is the Property Valuable if I Need to Sell it?
While every business owner expects their business to succeed, many do not. What kind of market value will your land and buildings have should the business shut down? You want to purchase land that can be turned quickly and is attractive to developers who might see a chance to flip the property to another type of owner.
What are Some Considerations for Finding a Lender?
Lenders are plentiful, but not all of them are worth your business. An excellent lender will be aware of local land areas and any restrictions of use that might be connected with them. It is always a good idea to have a special relationship with someone you trust and who will be honest with you and your f[resources.
Are there Tax Incentives?
Many areas (states, counties, or municipalities) can offer tax incentives to construct business sites. Some cities have industrial parks specially built to develop factories or warehouses. They may be willing to negotiate if a business considers locating within the boundaries. In addition, the SBA and Work Opportunity Grants offer credits for hiring certain employees or maintaining a certain number of employees, or building with sustainable energy products.
Don’t be Afraid to Search for the Best Rate.
Land purchases are compounded by the fact that they are some of the riskiest loans on the market. Many financial institutions will charge higher rates for commercial real estate and will charge accordingly. A good rule of thumb is to have a complete business plan and all environmental and feasibility studies that have been done. If the lender sees that you have taken the time to assess the viability of the business and the economic impact that it might have, they will be more likely to consider the value of loaning money to you.
While local lenders should know the lay of the land around them, they may not offer the best rates. Different lenders will require different things. Higher down payments or more collateral may be required to secure the land and business loans needed to get your operation off the ground. Frequently, local lenders are willing to compete for your loan if you can effectively quote a competing interest rate from another lender. While the lender might give you an aggravated look, don’t flinch. It's just business; you want to reward a lender who wants your business.
Be aware that the Lender Will likely Check Your Personal Credit.
The lender will likely assess your credit for a determination of approval. While your creditworthiness may impact your ability to get a loan or the interest rate you pay, it doesn’t mean you can’t get a loan. The SBA (Small Business Administration) has many programs for those business owners with less-than-perfect credit that are worth exploring. A call to a local SBA officer can provide you with the resources that might minimize the amount of money you have to borrow from the bank.
About THE AUTHOR
Brittany has been in the land business since 2020 when the world was starting to shut down. Since then, we’ve sold to dozens of people from ATV weekend warriors to camping enthusiasts to retired truck drivers. Our inventory spans mostly in the western United States. We’ve been trained by experience, land acquisition courses, and hundreds of hours meeting with county assessors and clerks, zoning officials, realtors, and land investors. We’ve answered hundreds of questions from people regarding the buying and use of land.Read More About Brittany Melling