Looking to Buy Land? Here Are the Top 10 Tips to Consider
You’ve read up on land, did your research and your gut is telling you this is a great investment opportunity. Land will become more scarce as the world continues to populate at an ever-growing rate.
And putting this into perspective will make you see the bigger picture. There are over 7 billion people alive today, but 200 years ago, humans numbered less than 1 billion in total. Given the long history of humans, statistics suggest 6.5% of all the people to ever walk the earth are alive today.
Population growth was .5% historically before it jumped to 2.1% annually during the baby boom and is somewhere around the 1.2% mark right now.
Great. What does this have to do with land? A lot actually. People need land to survive, build homes, grow crops and raise a family. And since land is limited, the investment you make in land today will only continue to grow.
If you’re looking to buy land, there are a lot of things to consider:
The location of the land is important. Land near water is important and fetches a higher price, while land in city centers is expensive and will see its price rise more rapidly. Research the location and make a wise investment.
If you don’t find a property in the middle of New York City that you can afford, look to outlying areas that are slowly finding that their population is growing
2. Research Swamp Land
Swamp land is a big “no-no.” You want to be able to sell the land. When land isn’t able to be built upon or requires a large upfront investment to prep the land for building, rethink your options or selling in the future may be too difficult.
County records will be able to assist you during your research.
3. Sellers Often Finance Land Sales
The seller of the property will often finance the sale of their land. Working with traditional lenders can be impossible in some circumstances, so ask the owner if they’ll finance the sale of the land.
Oftentimes, owners are willing to finance the sale of vacant land at a decent interest rate. But do expect financing to be short-term – no 30 year terms in most cases.
4. “Cold Call Owners”
While not always the ideal way to buy land, if you find a parcel of land that you simply must have, contact the owner of the land. Oftentimes, owners of vacant parcels will be willing to sell land for the right price.
Don’t go and spam call everyone in town, but you can research land records and send a letter to see if the owner is willing to sell.
5. Think About Income-Related Options
Income can be made during the ownership of the land. Many investors dabble in dividend yielding stocks because they make money on a quarterly basis, but the same can be done with land to some extent.
Leasing the land may be possible as well as renting the land to farmers, growing timber, farming the land and so on.
If you don’t mind sitting on your investment without making money, that too is acceptable. But land can generate income in a variety of ways.
6. Research the Surrounding Market
Never jump on a deal without doing your research on the surrounding market. All too often what seems like a once-in-a-lifetime deal will actually turn out to be a bad investment. Acreage prices in the Northeast, for example can be multiples higher than land found in South Carolina or in Mississippi.
Always do your research to ensure you’re not overpaying for land.
7. Buy Buildable Land
If you plan on selling your land in the long-term, you want to make sure that the land is buildable. It’s foolish to buy swamp land, for example, because offloading the land will be difficult. Buyers want land that they can use to build either residential or commercial buildings.
If the land is impossible to build on or requires a massive investment to become buildable, you may think twice before buying it because selling the land will be very difficult.
8. Think About Taxes
Land needs to be assessed from a tax perspective, too. Property tax on vacant land is often very low, so it’s not much of a concern. But you do want to know how much property tax is required per year on the land you own.
The county tax assessor will be able to provide you with past tax history for your desired property. If you pay too much in taxes, the price of taxes may negate the property value increase causing you to lose money on your investment.
9. Building Requirements Matter
The plot of land you choose will be governed by the city’s building ordinances and regulations. Some of these rules and regulations can seem outlandish, and this is an issue for a buyer. For example, smaller plots of land may have difficulty getting a permit to add a septic tank to the property because it’s not a certain distance away from the road or neighbors.
In this case, you may not be able to do anything with the land without jumping through hoops.
Always consider the building requirements, codes and potential permit issues that may arise if you plan on erecting a building or selling the property in the future.
10. Cash is King
When negotiating the price of land, know that cash is king. Many small investment opportunities exist that can be added to your land portfolio. Getting financing from a traditional lender will be extremely difficult, too.
But when you have cash, you have negotiating power. When buying in cash, you have the leverage to demand a better price. Sellers may drop the price by as much as 10% or more because you’re waving cash in front of their face. If you don’t have cash, you’ll likely pay full price for the land.
Buying land is a serious investment, and you should follow the same level of diligence when buying land as you would with any other investment.
What Are the Best U.S. Areas for Multi-Family Investments?
Looking to Buy Land? Here Are the Top 10 Tips to Consider
When Should You Start Investing in Real Estate
Why People Buy Land, and Why You Should Do It, Too
7 Best California Areas to Find Residential Buildable Land for Sale in 2017
Finding Great Real Estate Investment Opportunities in California
Overview of the California Real Estate Market
Finding Bargain Properties for Sale in the California City Area
California Desert Real Estate Properties - Are They Worth It?