Buying Land - What You Need to Know

Buying raw land is far cheaper than buying a house, and there's a romance to the idea of creating your dream home literally from the ground up. Land is also potentially quite profitable—occasional market corrections aside, the value of property tends to appreciate steadily almost everywhere in the world.

While land ownership may look like a simple matter on the surface, though, there are a lot of details that can complicate your life in the long run if you don't think about them upfront. Before investing your hard-earned money, consider these important elements of purchasing undeveloped property.

Land Zoning and Usage

If you have a plan for the piece of land you want to buy, make sure it correlates with local rules about its use. You don't want to get stuck realizing you can't build the structure you wanted because of a technicality you didn't notice.

Land use is determined by zoning or planning departments, and usually includes lot types like residential, mixed-use, industrial, commercial, and public. The details can be devilish, though. You might buy residential land in a residential area but find restrictions you don't like about how big a structure you can build, or where you have to put it.

You're especially likely to encounter restrictions if your property borders riparian, coastal, or public land. In many localities, for example, property owners are required to leave a buffer zone of up to 30 meters from rivers or other water bodies. There may also be endangered animal life nearby, which in many places means more limits on construction.

Find about the zoning restrictions of the land you're looking at by contacting the municipal authority of the area containing it. A five minute call may save you major headaches in the future.

property deed

Annual Taxes

Especially if you're approaching land as an investment commodity, you need to crunch these numbers, since the percent at which your land gets taxed will significantly impact your ultimate ability to profit from a sale. If the property appreciates relatively slowly, and you're paying high taxes on it, those taxes might eat any net income you might earn from the flip.

Look into how much land has appreciated over the last several decades in the area you're considering, and compare that with the percent you'd be paying in taxes if you owned it. If the tax rate is higher than the rate of appreciation, it might end up costing you money to hold the property.

Insurance Rates

Insurance companies sell policies to cover most kinds of land, with rates determined primarily by location and risk level. In a few places, like areas prone to disastrous flooding or fires, premiums might be very high, or even unavailable.

Topography

If the land is very rocky, or filled with dense root systems from nearby trees, you might get stuck spending a large amount of money on preparing it for a home. If you're making a major investment, get the plot inspected for things like underlying ledge that could make building a foundation difficult.

Access to Utilities

Electricity, water, and sewage connections will be crucial if the land is intended for residential development. If there are houses nearby, these connections will be relatively easy to establish. If the land is remote, the cost of getting them hooked up may quickly run higher than the price of the parcel itself. If you're buying land for agriculture, the most important factor will be access to water, so try to find a plot with nearby plumbing to tap into.

hands with pipes

Security And Community

Some of the best cities to live in the world also suffer from significant security issues. Check the crime rates in the locality where you intend to buy, especially if you see a surprisingly low sticker price. Consider how far the land is from police and fire services, and how often you might be able to check up on your property.

Community features like hospitals, malls, restaurants, and performance venues will all increase the value of your land over time, and make it more fun to live on. If you're thinking about starting a family on this plot, make sure to investigate the local school system.

History

Check the records of the property deed to find out if any construction was attempted in the past, and if it was planned, why it wasn't completed. Keep an eye out, too, for any old industrial use that may have left hazardous materials behind.

Legal Details

It's a good idea to get a practicing property lawyer to guide you through the purchasing process and navigate these potential pitfalls. In addition to helping you figure out the details of usage and expense, and making sure you're following the local laws, they can verify whether the land you're buying has pending cases in court that might affect ownership.