Warning Signs To Look For When Buying Vacant Land
nt Land is one of the most overlooked and misunderstood real estate investments in the world.
Most real estate investors completely fail to recognize the superior benefits that come with owning land in its raw form.
It’s unfortunate, because the simplicity and stability
that comes with owning the right piece of land (purchased
at the right price) can far outweigh the myriad of problems that are certain to come up with any other type of real estate.
While I firmly believe that vacant land is one of the best places you can put your money, there is another side of the story that needs to be carefully considered.
After buying and selling a few dozen parcels of land over the past few years, I’ve learned (sometimes the hard way) that there are a number of things that need to be evaluated before purchasing a parcel of vacant land.
Land Can Be Deceptively Complicated
On the surface, it seems like such a simple creature – but there can be A LOT of potential problems lurking beneath the surface of any piece of land. I wouldn’t necessarily say that these issues are common, but the fact is – any one of these issues could potentially be a deal killer if not addressed properly. When you take it all into consideration, it adds up to a sizable list of things that need to be investigated as part of your due diligence process.
Don’t get me wrong, land is a rock-solid investment. It’s just a matter of knowing what to watch out for, and under what circumstances you should re-adjust your offer price (or walk away from the deal altogether).
What is the Zoning on the Property?
First and foremost, it is vitally important to understand what a property can be used for, and what the highest and best use of the property is. With a simple phone call to your local planning & zoning department, most offices can give you the answer to this question in a matter of seconds. Once you know the zoning classification (e.g. – residential, mixed-use, commercial, industrial, agricultural, etc.), ask them to give you some examples of what type of property would be allowed under each of these particular zoning classifications. They may even give you some ideas that you hadn’t previously thought of. Once you understand the most ideal use of the property – you can quickly determine whether it will fit your needs (or the needs of those you intend to market the property to).
What is the Availability of Public Utilities? Water, Sewer, Electric, Gas, Phone, Etc…
If a property doesn’t have access to one or more of these staples of reasonable living, the property (for all intents and purposes) may not be considered build-able. After all, who would want to build a house where they can’t flush the toilet or get access to clean water? If a property isn’t build-able, you will lose a massive portion of the property’s usability, marketability and value. Since most people buy land with the intent building on it, you will definitely want to be aware of anything that could become an obstacle to that objective.
Does the Property Have Any Usage Restrictions?
Most of the vacant land parcels I come into contact with have SOME kind of usage restrictions. Most cities and townships impose very reasonable restrictions, and most home owner’s associations will intentionally put even more stringent restrictions in place to help maintain an element of formality and “predictability” in the neighborhood. The idea is to keep out any bizarre behavior (cars in the front lawn, yards that nobody takes care of, etc.) or building plans. This ultimately helps to maintain the mutual value of all buildings in the subdivision.
Restrictions usually make sense on some level – but they may not make sense for what YOU intend to do with the property. Make sure you understand what the rules are, so you don’t end up in a fight with the property owners association or having to pay fines because you can’t live with these rules.
Is the Property Located in a Flood Zone?
In some parts of the country, parcels of land are vacant because they are literally under water. In other areas, there are many properties located within close proximity to bodies of water that is prone to flooding. In either case, if a property is at risk of flooding – you’ll want to know about this before you buy, because properties in a flood zone can be extremely expensive to insure. Land that is located near a state of federal body of water can be extremely valuable, but this close proximity to the water can also create a flurry of issues… so be sure you understand the ramifications of your particular location.
Is the Property Landlocked? If so, are there any Easements to the Property?
It’s an odd phenomenon, but believe it or not – there are thousands of properties all over the country that have no road access. They are surrounded on all sides by other private property – which (according to some) deems the land virtually useless. In a sense, these properties might as well be on the moon – because nobody can legally access the property.
This issue can be overcome if you can establish a legal, recorded easement to the property. This can be done if one of the neighbors is willing to allow you access through their property – to yours. In many cases, a neighbor shouldn’t be expected to do this for free, you’ll have to give them a reason to help you (usually in the form of money). Again, this isn’t an impossible issue to overcome, but it is definitely something you’ll want to be aware of before you purchase.
Will You Have Access to a Water Source? If Not, Can You Drill a Well (and at What Cost)?
Many properties don’t have access to a municipal water supply. This isn’t necessarily a problem IF you can drill a well to access a clean water source beneath the surface. There are a few ways to determine whether or not you’ll be able to do this but in most cases, if there are surrounding buildings in the near vicinity (e.g. – homes or buildings built right next door on both sides), this is a good indication that you won’t have any problems accessing water either. On the other hand, if you’re looking at a vacant lot in the middle of the desert with nothing around for miles, you will probably want to verify with a professional that water will actually accessible if/when you need it.
The trick with vacant land is to understand why it’s vacant in the first place. I’ve run across quite a few vacant lots that seemed attractive at first glance, but eventually I discovered that the reason nobody was using them was because you CAN’T use them. If one (or more) of the issues above are prohibiting someone from putting a property to good use, believe me – you don’t want to find out after you already own it.
When some people look at the prospect of owning land, they get wrapped up in the dream of property ownership. The idea of owning a large tract of property can seem very appealing, even if it is of no practical use to them. This kind of trap is especially easy for people to fall into with land, because it’s a low maintenance property and doesn’t seem complicated (even though there are a lot of factors to consider).
MANY people buy into the dream of property ownership – even if the investment makes absolutely no sense from a financial standpoint.