Vacant land investments can result in massive financial returns, but you want to be aware of the do’s and don’ts before you make any serious commitments.
To buy vacant land you must determine your land goals, create a budget, search for parcels, hire professional inspectors, obtain permits, and make an offer to the property owner. You should consider location, utilities, surveying, road access, zoning, and easements when buying vacant land.
After extensively researching the real estate market, I have gathered enough information to determine everything that you need to know about buying vacant land. My research has indicated that you need to carefully consider your finances and the specs of the vacant land before you sign off on any parcel.
- To buy vacant land you must determine your land goals, create a budget, search for parcels, hire professional inspectors, obtain the right permits, and make an offer to the property owner.
- You should consider location, utilities, surveying, road access, zoning, and easements when buying vacant land.
- The best way to finance vacant land is with a personal loan, land loan, seller financing, or a USDA land loan.
Table of Contents
What is Vacant Land?
Whether you are evaluating real estate for a potential investment opportunity or simply looking for a property deal to build a dream home, vacant land parcels come with a lot of incentives. However, it can sometimes be difficult to distinguish a vacant property from an empty plot of land unless you know what to look for.
In layman’s terms, vacant land is any property that has not been developed. There can be no permanent buildings or structures in place and the official classification for the parcel must be ‘vacant’. Roughly 17% of all urban land in the U.S. is vacant, which is astonishing when you considered how dense cities are becoming across the country.
The reason for this is that not all vacant land parcels are the same. Each piece of vacant real estate will vary in specs and size - with some offering fantastic opportunities for investment and development.
More often than not, a vacant property will look like an empty plot of land with no sign of development. Some parcels may have temporary structures, but the overall condition of the land should be more or less empty and barren. Having an eye for real estate can make all the difference in identifying vacant land that is worth developing and investing in.
With that said, whether you want to build a private home or flip a property, I recommend that you approach land acquisitions with careful consideration, as there is a lot to take in when evaluating a vacant parcel.
How to Buy Vacant Land
I find that reviewing properties for potential acquisition is as exciting as it is intimidating. For most people, purchasing land is the biggest financial decision that they will ever have to make, which puts a lot of pressure on the buyer to make the right choice.
If you have the bankroll, buying vacant land is not a very difficult process, as there are plenty of property owners that will be happy to take your money at their asking price. Unfortunately, this does not apply to most aspiring homeowners - or even a lot of real estate investors.
Buying vacant land requires you to go through the buying process, which never starts with signing a deed. Before you can obtain the keys to your new vacant property, you need to follow the steps required to ensure that the land is right for you.
1. Determine Your Land Goals
The starting point for any land acquisition is being aware of your land goals. People get into real estate for different reasons and this will play a huge role in determining which vacant properties are aligned with your goals.
Real Estate Investment
Some people are into flipping, which involves buying and selling real estate to get quick financial returns. Buying low and selling high can reap massive financial returns if you understand how to play the market.
Other real estate investors are in it for the long haul and either pursue development or simply hold onto the property for years while watching its real estate value climb. Purchasing vacant land in the right location can be a fantastic investment opportunity.
Private Home Development
The majority of us are assessing vacant land parcels because we want to build our dream homes. When I review vacant properties, I am often convinced that this is the right parcel simply because the price seems too good to be true.
While establishing a well-rounded budget is key, you need to look past finances and consider that this is the land where you will build your home - potentially for the rest of your life.
That is why I recommend that you sit down and formulate an in-depth and detailed plan. This includes writing down everything that you want to achieve with your vacant land acquisition, including any development projects.
A well-constructed plan that is calculated and detailed will be fundamental for your search as you weigh out vacant properties on the market - and it will help you distinguish viable real estate options from properties that are not worth your time.
2. Create a Budget
After your land goals have been determined, the next step is to create a budget. Assessing your finances and understanding what you can and can’t afford will be paramount for ensuring that you are not biting off more than you can chew.
One of the biggest mistakes that I see a lot of aspiring homeowners make is committing to a property that they cannot afford. It can be easy to underestimate the financial requirements to build a house - especially when you are developing from scratch on vacant land.
The reason for this is that a lot of people see the affordable price of the land itself and then end up signing off on the property before they considered how much it will cost to build on it. You need to calculate your budget thoroughly and leave no stone unturned.
Naturally, how much you have in your savings account will be the baseline for your initial budget. The bigger the bankroll that you have to get the operation in motion, the better off you will be moving forward.
With that said, your long-term income will also be a mandatory figure to consider. There are very few people in a financial position to buy a vacant property outright.
Depending on the vacant land that you are reviewing and what your development goals are, I highly encourage you to consider your income security in the months, years, and decades to come.
Provided that your financial situation will be stable for years for the foreseeable future, you can feel much more confident in creating a budget that involves taking out a loan.
Odds are you will most likely need to seek financial assistance to buy your vacant land. Banks and financial institutions rarely offer loans that are as attractive for vacant properties as they are for developed parcels. Without a structure to use as collateral, banks take greater risks when giving out loans.
Most banks will loan you just 40% to 60% of the amount required to buy the vacant land - implying that you will definitely need to dip into your savings to make the acquisition realistic.
In addition, any loan that you do get is going to require you to pay interest. With interest rates currently rising due to rampant inflation, you can expect to pay anywhere from 4% to 5% on your vacant land load.
Ultimately, it is essential that you create a budget that is calculated based on your savings, income security, and the loan options that you have available to you. The last position that you want to find yourself in is being stuck with an empty vacant land parcel without any means to pay it off or develop it.
3. Vacant Land Search
Once your vacant land goals are established and your budget is set, you can begin the process of actually evaluating properties. The biggest mistake that a lot of people make is starting with this step first, as it’s a sure way to set yourself up for failure.
Finding Vacant Land
There are a number of different ways that you can search for vacant land and there is not really a right or wrong way to do it, so long as you find the parcel that you are looking for.
Real Estate Agent
The traditional approach would be to rely on a real estate agent. Each country and municipality have real estate agencies that can help you track down your perfect vacant property. They are professional, reliable, and will do the bulk of the groundwork for you.
With that said, they will also take a commission or a fee, which does imply that you will have to pay more for the property.
Online Real Estate Search
I find that the most convenient and affordable approach for getting a range of potential vacant land options is to utilize online resources such as:
Online real estate sites are going to be your best friend for hunting down the perfect vacant land parcel. There are thousands of listings across various sites and platforms that offer real estate buyers an expansive selection of options to consider.
I recommend that you take your time. Do not rush the buying process and create a detailed spreadsheet that lists all the vacant properties that you are considering. Before you conduct a physical evaluation, make sure that you have an organized layout of each parcel so that you know exactly which questions to ask the property owner when you arrive.
Evaluating Vacant Land
Naturally, you should have your land goals and budget in mind you evaluate any vacant property. This will help you weed out any parcels that are not worth your time, as there will be plenty.
With that said, once you have narrowed down your options to a select few, you should be ready to evaluate the property yourself. Schedule an evaluation with the land owner and inspect the property to make sure that it looks as good on paper as it does in real life.
The condition of the land should match the listing and be aligned with your expectations. Assess the surroundings of the area and confirm that the location is suitable for what you have planned for the property.
Evaluating a vacant land parcel must be thorough and make sure that nothing is signed until you are 100% confident that this is the right parcel for you. I encourage you to take your time and not be impulsive, as it can be easy to overlook minor, or even major details. More on this later.
4. Professional Inspection
After your personal evaluation, it would be wise to confirm the condition of the property with a professional inspector. While this does require some additional financing from your end, it is one of the safest ways to confirm that the vacant property is worth your time.
Hiring professional inspectors can quickly add up, but it can also save you a fortune by helping you evade a potential bad buy. In addition, you can use the inspector's findings as a bargaining chip at the negotiation table. These are the inspectors that I would recommend hiring:
- Property Inspector
- Environmental Inspector
You do not need to necessarily hire all, or even any, of these professional inspectors. However, it would be wise to cover your bases and confirm the details of the land. Not all landowners are as trustworthy as you might think, and property details could easily be brushed under the rug or overlooked completely.
At the end of the day, if you are considering putting thousands or even millions of dollars down on a vacant land parcel, hiring professional inspectors is a great way to secure the investment and confirm its value.
5. Permits & Restrictions
Although it can be easy to assume that vacant land acquisitions are straightforward and simple, the truth is that there can be plenty of speedbumps along the way.
Depending on the parcel that you are assessing, there could be any number of restrictions that either require permits or prohibit development altogether. This can be a pitfall for a real estate investment and there are plenty of projects that have been scrapped because someone didn’t do their homework.
There is nothing worse than committing to a property and signing paperwork only to find that your goals are not aligned with zoning, environmental guidelines, or some other kind of restriction. Without trained knowledge or professional assistance, these issues can be tricky to spot, which is why I recommended hiring an inspector.
Permits and restrictions can greatly vary across the board, as there are a plethora of regulations applied to real estate acquisition and development. If the vacant land that you are considering does not have any serious restrictions and you are satisfied with the price and condition of the land, then you should not run into any obstacles down the line.
6. Making An Offer
The final step of the vacant land buying process is to make an offer to the property owner. Although the finish line is within sight and you are probably eager to sign off on a deal, I would advise you to be patient and avoid impulsive action.
This is a critical phase and it can dictate how much you save or overspend on the acquisition. Unlike buying something at the store, real estate transactions often involve bargaining. This means that you can save yourself a ton of money by making an offer that better suits your budget.
In fact, you may find that you are able to spend considerably less on vacant land than you had initially estimated. Vacant land is much more affordable than buying a developed parcel. And although most landowners will only bargain to a certain extent, there is rarely harm done in making an offer that is lower than the asking price.
Depending on the property that you are evaluating, you may have been able to find a number of issues regarding the condition parcel or potential restrictions associated with the land. These are your bargaining chips and you can use them to drive the price down, which can ultimately save you a lot on your final costs.
If an offer is made and it does not perfectly align with your ideal figure, sleep on it. Holding off on a purchase is rarely as risky as jumping the gun and committing to a property that you are not 100% confident in.
This is also a key moment to put alternative forms of financing on the table, as many buyers are open to suggestions - so long as they get their money. Once the offer is made and both parties are happy with the price and conditions, the vacant land will be signed over to you.
What to Look for When Buying Vacant Land
I’ve covered the steps that you need to take when buying vacant land, but we have only scratched the surface of all of the things that you need to look for when you consider a property.
If you want to see the biggest return on your vacant land investment or ensure that you are buying a property that is suitable for building a home, it’s crucial that you exercise due diligence. Do your homework, be thorough, and avoid making rash decisions at all costs.
The best way to verify that your vacant land parcel is right for you is to know exactly what to look for during your evaluation. There is a lot to consider during a property inspection, which is why having your vacant land goals established is of the utmost importance.
The golden mantra of every real estate investor is location, location, location. While this may be particularly vital for investors looking to profit, it is equally important to prioritize this factor if you are just an aspiring homeowner.
There is nothing that will dictate the value of a piece of real estate more than its location. This is the ultimate way to safeguard a land investment and it is how you can profit from your property down the line - whether you decide to sell, rent, or hold.
With that said, location not only dictates the resale value of a property it also determines how useful and practical it is for your goals. If you are planning on pursuing development on your vacant land, you want to confirm that the location is suitable for whatever operation you have in mind.
If it’s a commercial business that you want to build, confirm that the area you are developing in is advantageous to your business interests. Most homeowners prefer to live in an area that has access to basic amenities and is situated in (or near) an urban area. This includes schools, employment opportunities, natural surroundings, and other amenities.
On the other hand, farming operations may not require the most attractive locations but they still need to be suitable for growing food or raising cattle. If the vacant land that you are considering is not ideal for either, then you should look elsewhere. At the end of the day, location is king and you should be 100% certain that the area you are considering is appropriate for what you want to achieve.
For a lot of people, utility access is an essential requirement for their vacant land. This is particularly the case for any property owner that wants to develop their land for either a business or private residence.
Whether or not a vacant land parcel has utilities hooked up can be a bit of a toss-up. This can cause a major headache if you sign off on the property before confirming that the utilities meet your expectations. Some vacant land parcels have all utilities already hooked up, which makes development very straightforward and hassle-free.
However, this is by no means always the case with a vacant piece of real estate. You may find that the vacant land has partial or no utility access at all. The location of the property will influence this more than anything.
More often than not, just about any vacant land bought in an urban area will have no issues with hookups and utilities. Vacant land that is desolate, rural, and out in the middle of nowhere is a whole other story. These are the utilities that you should look for in a vacant land parcel:
- Waste Disposal
Rural vacant land can be problematic for utilities, as there may not be an urban area close enough to you to offer these services. If you did not calculate this into your real estate goals, then you will be forced to either live without or find an alternate solution to get the utilities that you need. The best way to avoid this is to confirm the utilities of the vacant land before you buy it.
Property specs are important to confirm when evaluating vacant parcels. If the vacant land you are assessing is in a dense urban, cookie-cut neighborhood, odds are the physical dimensions of the property are accurate based on the listing information.
However, vacant land parcels surrounded by large undeveloped areas, particularly those in rural locations, are not always as reliable. If the current property owner has not conducted a professional survey in a while, it would be wise to get a confirmation of the land specs before you commit.
Land surveys conducted decades ago are not always accurate, and this can become an issue if you plan on pursuing a development. Whether it is an inch, a foot, or an acre off, you certainly do not want to start developing somebody else's land. This can result in entire projects being scrapped.
The best way to avoid any complications with the specs of your land is to hire a professional surveyor. Depending on the size of the vacant land, this can cost anywhere from $200 to $500+. Although this requires you to pay more, it is well worth it to confirm your property information.
Easements are a red flag for a lot of real estate investors as they can complicate building projects and be a huge limitation on development. An easement is essentially an agreement that the previous property owner made to give up certain rights to their land.
Some easements are very straightforward and simply involve a landowner agreeing to share the costs of owning and maintaining a fence or border. Whereas others may allow public road access through parts of the property such as to build a highway.
What you want to watch out for in particular are conservation easements. These are quite common in rural areas and they often put strict limitations on developing real estate.
A conservation easement is an agreement made by the property owner to protect the land for environmental and ecological reasons. This could be to secure natural resources or protect wildlife and habitat. The bottom line is that an easement can potentially sabotage your vacant land goals, which is why you should inquire about this when you speak with the property owner.
Whether you want to acquire vacant land to build a home or as an investment strategy, road access can be a critical feature for a lot of people. A vacant property that you cannot physically reach poses a lot of issues - especially if you plan on developing.
This will not be an issue in an urban area, as road networks are designed to make accessing properties very easy. Rural areas, on the other hand, do not always have road access. The reason that this can be such a huge problem for a lot of people is that you can potentially be landlocked.
A landlocked property implies that you cannot build a road to connect your parcel to a public road without the permission of neighboring landowners. This can complicate your development - especially if the neighboring landowners do not permit you to build a private road through their property.
In addition, road access also influences whether or not you can connect utilities to the parcel. A lot of public utilities need to pass through public land in order to reach your property, which can be next to impossible if you have no road access and are landlocked.
Zoning laws exist so that development projects are structured and city planning is organized. Although zoning laws offer a lot of benefits in a societal sense, they can potentially be a drawback if they interfere with your land goals.
Vacant land in rural areas rarely has strict zoning laws - and if there are zoning laws in place, they are usually very transparent and easy to follow. However, urban areas are more complicated and zoning can cause a lot of problems for developers - especially if due diligence was not taken prior.
Parcels are zoned for specific purposes - implying that you cannot use the land for anything other than what the zoning laws dictate. These are common zoning classifications that you can find for vacant land:
Zoning laws can actually get much more complicated than this, but what you ultimately want to confirm is that the vacant land you are evaluating is zoned for how you intend to use it. Pursuing a development that violates the zoning laws of the parcel will result in serious legal complications and you may be forced to abandon the project.
How Much Does Vacant Land Cost?
Determining how much vacant land costs can be very subjective, as there is no figure that can be applied to every parcel. As I mentioned, location dictates the value of a property more than anything and this will influence how vacant land is priced.
With that said, the average price of land in the United States is $1,480 per acre. This is a good baseline figure to keep in mind as you evaluate parcels. If the vacant land is rural, then its value could potentially be even lower - especially if the area is unattractive.
Urban areas are much harder to predict. The value of a vacant property in a thriving city can potentially cost hundreds of thousands or even millions of dollars. That is why it’s important to research and evaluate every vacant parcel, as there are a lot of factors that influence the price.
Where is the Best Place to Buy Vacant Land?
Given that location is such a key factor for buying land, you should consider which places are best for purchasing real estate. Ultimately, what is best for one person may not be best for another.
Most importantly, keep your land goals in mind when evaluating properties. If the location of the vacant does not align with your goals, you should disregard the property.
However, for some people, the location of the vacant land can be a bit more flexible. If you are not locked into a specific city, county, or state, you can enjoy the freedom of choosing a vacant parcel anywhere in the country. This gives you a lot more options and it’s also opportunistic for saving money on your acquisition. Based on the average cost of living and the average price of land per acre, these are the best places to buy vacant land in 2023:
- South Carolina
- North Carolina
While there are exemptions to affordable land prices such as in thriving urban cities, these 10 states offer the most competitive prices for real estate. If your main priority is to save money on your vacant land purchase, these states are great places to consider.
How to Finance Vacant Land
Most people that want to buy land cannot do so without relying on financial assistance. Real estate prices are not what they once were and most Americans spend years or even decades paying off their loans.
Although taking out a loan can feel a bit intimidating, it’s also the most realistic way to buy land in the current market. The problem with this is that financial institutions are not as likely to give you an attractive loan on vacant land. An undeveloped property without any inherent value presents more risk, which results in poor loan conditions.
With that said, I advise you to consider all of your options when taking out a vacant land loan, as you will find some approaches may suit your interests better than others.
The best way to finance your vacant land acquisition is to borrow money from someone within your private network. By working with friends and family members, you can skip the banks, which results in fewer risks in case things don’t pan out with your acquisition.
That does not imply that you should roll the dice on a real estate purchase because it’s not technically your money. You should understand the risks and calculate your budget carefully - even when opting for a private loan.
The majority of people that buy land, do so with a land loan. This is a bit different than a standard mortgage given that there is not a permanent development that can be used as collateral.
Land loans are typically more complex and they rarely offer ideal interest rates. These are the common interest rates for buying vacant land with the help of a financial institution:
- 10-year fixed: 4% to 5%
- 30-year fixed: 4.65 to 5.65%
In addition to high-interest rates, vacant land loans generally require a higher down payment. While a standard mortgage may only be 20% money down or less, a vacant land loan can be as high as 40% to 60%. This means that you will need adequate savings to even consider a loan on vacant land.
Seller financing is an agreement between the buyer and the seller to create terms that are mutually beneficial for both parties. With this method, you can negotiate with the seller before purchasing to pay off the vacant property over time.
This means that you can structure payments for the property without going through a bank. Seller financing often gives you the ability to have lower interest rates, as well as a smaller down payment.
USDA Land Loan
If you are planning on developing a home and are open to the location, one of the most affordable ways to purchase real estate is through the USDA. The United States Department of Agriculture has created a program to support lower-income households so that they can buy land at a good price without needing to go through a bank.
The requirements to qualify for a USDA land loan can vary but you cannot apply if you earn more than 15% of the median salary of the area you are living in. A USDA land loan comes with a lot of benefits, often including very low-interest rates and zero money down.
Pros & Cons of Buying Vacant Land
Understanding the pros and cons of buying vacant land can make a huge difference in determining whether this type of real estate is right for you.
The bottom line is that vacant land is much more affordable than buying a developed property.
In many locations, the building is worth exponentially more than the land that it sits on. This can make vacant land parcels very attractive for people that want to buy land on a budget.
Given that there is nothing built on the land, you have a lot of flexibility when deciding what kind of development you want to pursue.
A lot of people are locked into buying a home that they did not design, which is not nearly as personal as building from scratch. This also gives you the freedom to design a home based on your budget.
Pro: Less Competition
One of the best things about buying vacant land is that there is less competition. Most people looking to buy a home prioritize developed properties.
This results in vacant parcels being overlooked, which makes finding the right property much easier with less competition.
Con: Development Restrictions
There are plenty of situations where a property has not been developed for a reason. If there are restrictions in place that limit what you can build on the land and how you can use it, the parcel is as good as useless. Potential restrictions on vacant land include:
- Building Permits
Financing a vacant property may be cheaper in the long run because the parcel is usually priced lower than developed real estate. However, banks and financial institutions will require a larger down payment and higher interest rates, if you want to qualify for a loan.
Con: More Work
One of the main reasons why people actively avoid vacant land is that it requires more work. If you do not plan to use the property in any way, this is not a huge issue.
On the other hand, if you intend to build on the parcel, there is a lot of pressure to organize and structure the development single-handedly. This requires you to oversee the entire operation, which can be a problem if you overlook any logistics.
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