Have you found yourself dreaming of your own piece of our planet lately? Whether you are looking to build a luxury retreat, or you just want a natural escape, the dream of owning a piece of land is an understandable one. But before you leap, it is important to remember that buying land is different from buying property with a structure already on it. Here are some things to keep in mind.
If it’s an Investment, it’s a Long-Term Investment
Land is not a quick flip. You should only plan to buy land if you are going to hold on to it for a decade or more. Landholding can protect you against inflation, but its value is not going to rise quickly.
Pay Cash When Possible
If you are not going to build a home on your land right away, lenders will see you as a risk, and you will have to pay 30% or more upfront. If you are going to build right away, you can get a construction-to-permanent loan, which is different from a normal home loan.
Construction-to-permanent loans are a form of short-term financing. Your bank releases funds as construction stages are completed. Then, the loan rolls over into a traditional mortgage when construction is done. If you plan to build with a construction-to-permanent loan, and you do not have collateral in the form of a preexisting home, you will need to have nearly perfect credit.
Water and Septic Considerations
If you are looking at land that is not on a city sewer system, you may have to dig a well for water. That can cost over $10,000, plus the costs of water filtration. Some properties even require adding lakes or hydrants, so firefighters have access to a rural water supply.
If your land is not on a municipal sewer system, then any structure you build will probably need a septic tank. For that you will need a percolation test, which measures how absorbent the soil is to the liquid that comes out of the septic tank. If you cannot support a septic tank on your land, you probably will not be able to build or get a mortgage.
Review Deed and Zoning Restrictions
Before getting your heart set on land, it is important to look at deed restrictions to determine what you can and cannot do with the property. You will also have to figure out how binding these restrictions are. Restrictions might include limits on the building styles or square footage. The more rural the property, the fewer deed restrictions there are likely to be, but that is not always the case.
Land may be zoned for commercial use, residential use, or both. You will have to figure out if the land is zoned for additional structures like detached garages. Zoning restrictions can also determine the minimum structure size you can build.
Find Out About Easement Stipulations
If there is an easement on a property’s title, you will want to know the stipulations before buying. An easement gives another person or entity a legal right to someone else’s property for specific reasons, which may reduce privacy or cause other headaches.
Buying land can be a great opportunity, but a lot of research should go into the decision. Do your due diligence and consult with experts on real estate laws and local zoning guidelines. Like anything else, if a land deal looks too good to be true, it probably is.