Buying vacant land presents a lot of opportunities, but you are going to want to know what you are looking for so that you can make the best possible decision.
To buy vacant land you need to first establish the kind of land qualities you are looking for and how much you have in your budget. Once this has been determined, you can purchase land with either your savings, a group of investors, or through a loan.
When you acquire vacant land, you are essentially given a clean slate to pursue whatever type of development you want. This presents a lot of freedom to the owner to have complete creative vision and control over their project. With that being said you are going to want to be equipped with all of the right tools and resources to approach your vacant land investment strategically. While buying vacant land can be relatively straightforward, overlooking some key aspects of the property’s qualities can result in a poor decision. To prepare you for everything you need to know about buying vacant land, we are going to take you through the entire process.
After years of working as a real estate investor and land developer, I have had years of invaluable experience dealing with vacant land parcels. My experience within this industry has given me concrete insight on what qualities to search for when buying vacant land to ensure that each property is worthy of my investment.
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Buying Vacant Land
When it comes to investment opportunities, real estate is one of the most reliable ways of making money. Over the years, we have watched property values steadily increase, which has resulted in landowners seeing great profits from their investment. While many people opt for buying developed land given that it seems more financially viable, they often overlook the opportunities that come with buying vacant land.
The reason that vacant land can be such an incredible investment is due to the versatility of how the land can be used. Unlike developed properties, vacant land parcels give you a chance to pursue your developments from scratch, which enables you to design your project the way you see fit - without dealing with creative limitations and obstacles.
In addition, vacant land parcels can also have hidden features and assets that can be utilized if discovered. However, just like any investment opportunity, buying vacant land does come with its fair share of risks, which is why you want to know exactly what you are in for so that you can make a wise and calculated decision. With that being said, you are going to want to know what qualities to look for in your land to help narrow down your options so that you can find something that suits your interests and your budget.
Before you begin hunting down vacant land parcels, you should reflect on the vision that you have for your property. If you are buying vacant land to pursue your own development, having an idea of the kind of land features that are more appropriate for your project will serve as a foundation for your search. While vacant land parcels do have so much versatility, they do also have limitations, which can ultimately either make or break your property goals. Let’s dive into the process of buying vacant land.
While it never hurts to begin your search before establishing your budget, you should ideally have a general idea of where your finances are before making any serious commitments. Having an estimated budget for your project will help you narrow down your property options so that you are not wasting your time on vacant land parcels that are outside of what you can afford.
You should take the time to sit down and evaluate exactly what you think you can afford based on the land qualities that you are seeking. If you have adequate savings on hand, the process of determining your general budget will be relatively straightforward, as there are fewer financial variables for you to consider.
However, many real estate investors and private property owners have to be more resourceful with how they approach their budget, as most people are not financially backed to make such a huge land purchase on their own. There are a couple of different ways that you can appropriate your budget in this case. Let’s review your options.
One of the most common ways to achieve your ideal budget is through a 3-F Loan. This type of loan involves relying on someone within your personal network to receive funds for your vacant land.
The 3 F’s stand for family, friends, and fools. While the name of the loan does in some way have a negative connotation, it is still one of the best ways of appropriating your budget. If you have some friends, family, or acquaintances that are in a financially stable situation, they may be the perfect people to assist you with buying your vacant land.
After you have calculated your current budget, you should have an estimated idea of how much more funds you need to reach your target goal. Once you have established the dollar value that you need, you should create a definitive and well laid out plan for your land acquisition to present to your family, friends, or acquaintances.
Since you are likely going to be asking for a considerable amount of financial assistance, you want to make your lender feel as comfortable as possible with your 3-F Loan so that they can feel confident that you will be able to repay them.
3-F Loans are one of the safest and most reliable ways of reaching your ideal budget for your vacant land. These types of loans generally come with much more flexibility and are much less intimidating than dealing with a financial institution. Given that you are working with people from your own private network, you should be able to agree on terms that are fitting and realistic for both parties - without the pressure of being in the pockets of a bank.
While it is always much nicer to deal with family, friends, and acquaintances when seeking a loan for your vacant land, it is not always going to be realistic. If that is the case, then you will likely need to pursue getting financial assistance more formally from a bank.
As you have probably already guessed, getting a land loan from a bank comes with a lot more responsibility and risk. Banking institutions do not offer nearly as much leeway as a 3-F Loan and are will not be nearly as tolerant or forgiving if your finances are not in order when it comes time to make payments.
With that being said, you are going to be very well calculated with your current finances, how much you need to get to your current budget, and how long it will realistically take for you to pay back your loan. If you do not feel confident with your personal financial evaluation, you may want to seek the help of a financial advisor to help formulate a concrete plan to present to your bank.
An unfortunate aspect of getting a land loan for a vacant property is that banking institutions are generally less keen to lend money for such a land acquisition. Given that vacant land parcels have virtually no equity, it makes lending money for this kind of property much riskier for the bank, which is why you want to ensure that all of your finances are in order and that your plan is realistic and solid.
You will likely not be able to get a loan for your vacant land with zero money down. Most banks will require that you have at least a minimum of 20% of the current land value before they consider your loan application. However, you may find lower money down requirements with some banks, but you should beware of these loans as they may come with significantly higher interest rates.
A great way of reaching your budget goal is to work with investors for your land acquisition. Approaching your vacant land purchase by dealing with investors offers you the opportunity to not only reach your budget but also to share the risk that comes with buying the land with your collective.
There are a couple of different ways that you can approach seeking out investors for your vacant land purchase.
Much like with a 3-F Loan, some of the best people to contact for your vacant land investment are going to be the people that you know.
You may find that people within your circle are not always going to be interested in lending you money for your property, but they may be interested in working with you to share the potential rewards that come with owning the vacant land.
As always, having a well-composed plan to present to your potential investors will reassure them that the opportunity is there and that buying the vacant land can benefit them. With that being said, you are going to want to incorporate into your investment strategy exactly how the parties involved will be able to profit or benefit from the land acquisition.
If you are simply buying vacant land to pursue developing a private residence, you may find that investors are not as attracted to this sort of prospect given that the land itself is not generating money for them. To convince your investors that your property is worthy of their money, you should present an opportunity to them that the land will offer.
This will all be determined based on what the goals for your land are. The best way to make your vacant land investment look appealing is to pursue a specific type of business venture on the land. This could either be a commercial business or even simply an agricultural farm. Regardless of what you end up doing with the property, having a well-established business goal will make your vacant land investment much more attractive.
Real Estate Investment Group (REIG)
If you want to deal with professional and reliable real estate investors, one of the best ways to do this is to get involved with a real estate investment group (REIG). REIGs are organizations that specialize in real estate investments and pursue property acquisitions that are financially viable and profitable.
You can locate an REIG that is in your area or seek out an organization that specializes in your specific type of vacant land. Given that vacant land does not always have qualities that present immediate property value, you are going to want to highlight the opportunities that the land can offer.
Once you have established the qualities of your land and have created a foolproof plan, you can present it to your REIG for their consideration. If the organization is interested in your proposal, they will financially back your investment. You will then share the vacant land parcel with your REIG and all of its assets.
Once your budget has been properly appropriated, you can officially begin evaluating the properties that you are considering. The most important aspect of buying any property is its location. The golden rule of real estate is that location is everything and you are going to want to ensure that your vacant land parcel is either in an attractive area or is suitable for your intentions.
During this stage, you want to take your time location scouting and assessing all of the properties that are suitable for your investment. These days, you have loads of resources to utilize when hunting down real estate. While you always want to do physical inspections in person, a great place to start is to do some personal research online.
There are some great real estate websites that showcase thousands of different properties that are spread around the nation. You can begin your search by establishing the qualities that you want your vacant land to have and searching for them on the web. Once you have shortlisted some candidates that meet your standards and interests, you can take the next step by doing a personal inspection. Let’s take a closer look at the assessment process of your vacant land acquisition.
After you have narrowed down your search options, you can begin reaching out to each landowner that is tied to the properties you are considering. You may find that you end up dealing with a real estate agent responsible for selling the property and not the actual owner.
Once you have made contact with them, you can schedule an inspection of the property so that you can physically assess the qualities of the land. This stage is quite critical as you want to ensure that the property looks as good in person as it does on paper.
Individuals that sell land can often present their property as being more appealing than it actually is by hiding or masquerading some of its flaws. You want to be able to identify any issues that you have with the land so that you can make a well-informed decision before committing to the vacant land purchase. By spotting these flaws you can also use them strategically to lower the property value of the land before making an offer.
With that being said, not all of us are experts at assessing properties, which means that you may want to rely on the help of a professional to assist you during your inspection. The best way to do this is to seek the help of a land appraiser who can join you during your inspection, as they will have a keen eye at identifying land qualities and will then be able to determine the official value of the property.
In addition, you may also want to consider hiring a professional to come to conduct an Environmental Impact Report. This is important to do regardless of what your land intentions are but it is going to be essential if you plan on utilizing any of the natural qualities of the vacant land parcel. This report will determine the environmental health and value of your property, which will involve the natural resources attached to the land.
If all reports and inspections of the vacant land parcel come back with positive results, you can feel comfortable that you are making a safe and educated decision on your vacant land purchase.
Once your budget is in order and you have successfully found a vacant land parcel that ticks all of the boxes, you can begin the finalized process of purchasing the property.
The first thing you will do is sign a contract that will legally bind you to the land and the payment that you are committing to. If you have the full sum of money to back your purchase, you can establish a payment method that is suitable for all parties involved.
However, if your financial planning for your land acquisition involves making partial payments over an agreed period of time, the seller will likely require that you put down a deposit for the property.
At this stage, the seller will hand over the deed of the vacant land to you and you will officially be the rightful owner of the property.
Factors To Consider
If you have followed the above procedure for purchasing vacant land, then you should not have any issues finding plenty of great property options on the market.
Buying a property comes with a lot of pressure and, for many people, it is often the biggest financial decision of their lives. Real estate can be a cutthroat industry if not approached with caution, which is why you want to be as thorough and calculated with your planning and decision-making.
Some buyers find themselves in unfortunate situations when they overlook some key factors that are tied to their property that they simply did not catch or they were completely unaware of. To ensure that your vacant land purchase was successful and meets your full expectations, we are going to highlight some critical factors for you to consider when hunting down vacant land.
An important factor to always keep in mind when reviewing real estate is to be aware of the market trends of property values.
Land prices fluctuate and you want to be sure that you are buying at the right time and selling at the right time. If you are seeing that property values are extremely high and that the cost of your vacant land parcel is above what it should be, you may want to reconsider your purchase.
With that being said, a critical part of this process is to be patient and to know when to strike. Given that this is such a huge decision, you want to take your time and commit to your purchase when you feel completely confident by keeping your eye on the market.
A great way to stay in the loop of market trends is to work with an REIG that specializes in predicting property values. We don’t all have the experience and insight to determine what market trends to look for, but by working with individuals or an organization that understand the industry well, you can rely on their help for support.
Alternatively, doing personal research online and studying the past and current market trends of the area you are considering, could be a great indicator of where property values are headed.
A land quality that often catches many aspiring property owners by surprise is the easements that are sometimes attached to their parcel.
An easement is essentially a developmental restriction or agreement that the previous property owner made with an organization such as a land trust or with the government. These restrictions were designed to create some sort of practicality for the public or to protect valuable assets associated with the property.
The key thing to note is that easements can be a huge limitation for some vacant landowners. Some easements entail that the owner of the property is not to pursue certain development projects that defy the agreement of the easement. This can be extremely disappointing for vacant landowners that acquired their property to pursue a specific type of development that goes against the terms of their easement.
In addition, easements can also significantly lower the market value of the property. Given that the vacant land has development restrictions on it, the value of the land can drop significantly. This can be misleading to many buyers, as they assumed that they got lucky with an affordable land parcel, but then have to face the development restrictions attached to their property, which is why you always want to ask and confirm that there are no easements on your property and what their restrictions are (if any).
With that being said, not all easements will necessarily be a dealbreaker for your land acquisition. A lot of vacant land parcels, especially ones located in rural areas, have easements in place on them that have very loose and noninvasive restrictions in place. These could include things like:
- Allowing public access through a road that crosses your property
- Sharing a fence or border with a neighbor
However, if your property has a conservation easement in place, then you may find that your vacant land parcel has a lot of restrictions. If a property has a conservation easement, it means that the land has been established as conservation land and is under some level of environmental protection.
This sort of easement may entail that you are greatly limited with what you can develop and may also require that you manage and take care of the ecological features of the property. You may have a conservation easement that is in place to protect a vital natural habitat or to preserve vital natural resources such as soil and water.
Depending on what your land intentions are, you may find that your project is dependant on essential utilities in order to be successful. This is especially the case if you plan on pursuing development projects that are residential or business-oriented.
If the utility access of the property was not already detailed to you during your initial inspection, you should confirm all of the utilities that are connected to the property to ensure that they can accommodate the long-term goals of your project.
While you can expect most urban areas to have basic access to utilities already set up, you may find that a lot of rural properties lack proper utilities or are missing them altogether. Here are the common utilities you should consider before purchasing your vacant land:
If you are planning on leaving the vacant land untouched or have a moderate development planned such as agriculture, you will probably not need to have as many utilities connected. However, if you plan on developing your land further, having access to these utilities will likely be essential, which is why you want to confirm that connecting everything you need is actually possible before you sign off on the land.
The last thing that any landowner wants to deal with after acquiring a property is the zoning restrictions attached to the land. Zoning restrictions can be a huge hindrance to development projects and can sometimes be a defeating factor for some property owners.
While zoning restrictions are much more common in urban cities, they may very well be in place in rural areas as well. Some of the most common types of zoning restrictions will involve regulating the dimensions of any potential development you pursue. This would include the size, height, and width of your development.
You can also expect zoning restrictions to dictate the boundaries that you set around your property, which may also require that you set up access points to your land that are within the standards of your local building authority.
However, where zoning restrictions can become very tedious for some developers is when they limit how you can divide your property. Given that vacant lands often have a lot of space, some developers pursue these types of properties specifically to divide them and then develop them or sell them individually. This can prove to be a major problem for many property owners, which is why you want to be fully aware of any zoning restrictions attached to your vacant land.
While the majority of the time your property lines will be accurately detailed in your deed, you may find that the measurements of your property were made with older technology and don’t hold up to modern surveying standards.
This can especially be the case in rural areas and small towns that have not seen a lot of modernized developments. With that being said, you may want to consider hiring someone to come out and survey your property to confirm the official measurements of your land.
Ultimately, you don’t want to be in a position where your development projects are built outside of the property lines that you assumed were rightfully yours. This can result in serious complications with your developments and perhaps even legal issues.
About THE AUTHOR
Brittany has been in the land business since 2020 when the world was starting to shut down because of COVID-19. 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