You’ve made the decision, and it’s time to build the home of your dreams! Or, maybe you’re building for an investment opportunity. Either way, the first step is finding the right piece of land to build on. This plot of land will be the foundation for your home and the beginning step in the building process.
But is buying vacant land a good investment? It can be! We can help by sharing with you 8 essential things to look for when purchasing a vacant lot. Check out the rest of this buying vacant land checklist to get started.
1. Location
The location is an important factor to consider. In fact, it’s one of the first steps to buying vacant land you want to think about. Land can be used for more than one purpose, and different areas are better suited (or allowed) for specific uses.
You might be buying vacant land for investment or residential purposes. A good rule of thumb is to purchase land in areas with high population density wince this will typically mean more demand in the future.
Looking for resources? Try LandWatch, a free online source to search for land and rural properties on the market.
2. Know what you’re working with
Unless you’ve already found a completely cleared parcel that’s ready to build on, chances are you’ll need to remove overgrown trees and other foliage. The danger with this is that you don’t know what kind of terrain is underneath.
Although it may not be as easy, it’s important to see as much as you can on the lot. This can mean making your way through trees and brush to better understand what you’re dealing with. The last thing you want is a surprise that could threaten your plans to build.
You should also check elevation details and changes, test soil, and make sure a survey shows precise boundaries of the property.
Looking for resources? Google Maps and Google Earth can show you land elevation details. Soil can be tested with a basic soil test you can order online.
3. Permits & Zoning Restrictions
Note that you will need permits throughout the construction process. These may include:
- A building permit
- Utility permits and engineering plans for infrastructure like water, sewer, and electricity
- Zoning approval (e.g. a variance, conditional use permit, or planned unit development)
Before purchasing your vacant lot, it’s important to determine whether or not you’ll be dealing with any zoning restrictions.
Many states limit what you can build on your lot based on current zoning classifications (i.e. commercial or residential). For example, suppose the land is zoned for residential use only, and someone tries to build a retail store there. in that case, they may face fines or penalties from local authorities because they’re essentially breaking local laws.
4. Is it in a flood zone?
Although being a flood zone will not affect the actual purchase when buying vacant land, it will come into play later when you need to build and will require flood insurance. So, before purchasing the land, check to see if this could affect you. If so, it’s smart to look into the cost of flood insurance before deciding to buy and build.
Looking for resources? You can check the FEMA Flood Map Service Center to determine if a property is in a high-risk zone. Don’t have a physical address yet? No worries – you can use map coordinates!
5. The Fees & Costs
You may think that since there’s no home on the property, your lender will just use the tax-assessed value of the land. But funding for a vacant land purchase still involves an appraisal, and that means an appraisal fee as well.
As mentioned above, many of the lots you’ll see will need to be cleared before you can start your build plans. Depending on the size of the lot and the amount of clearing and grading required, this can be costly. You may want to obtain an estimate for land clearing before purchasing so you know what to expect if you move forward.
Other fees and costs to note might include:
- Title insurance
- Utility permits and engineering plans for infrastructure like water, sewer, and electricity
- A survey – this identifies the property’s boundaries and location of any easements, rights-of-way, and other encumbrances. The survey will also reveal if any zoning restrictions might affect plans for your structure. Surveys are typically done by licensed land surveyors who will provide you with a certified plat map showing the results of their work. The cost can vary depending on where you live, but it typically runs between $500 – $1,000 per acre surveyed.
- Running utilities to your site can be costly if public utilities aren’t available nearby. You should hire an electrician to run the power lines. Running water pipes from an existing municipal water main is another cost to be prepared for. Don’t forget about paying someone to hook everything up correctly!
6. HI Residents HELCO SSPP Fees
For Hawaii residents, SSPP stands for Special Subdivision Power Provision, which means that HELCO has outlined an area in which a cost-share charge applies for each parcel in that subdivision in order to help cover the costs of power poles and establishing electricity to each parcel in that area. If the owner of the vacant lot decides to participate, they pay that charge at the time. If not, the charge is not assessed until the owner of the land looks to establish a power connection.
For example, this fee for lots in Hawaiian Paradise Park can range from $2,000-$3,000 or more. This SSPP fee will be especially prevalent when looking at lots in Puna. When interested in a property, work with your realtor to find out if an SSPP exists and if there are fees needing to be paid for that lot. If so, you may even be able to request to have the amount of the fee decreased from the purchase price of the lot. This is something you would discuss with your realtor to see if that is a viable option.
Looking for resources? Get more information on SSPP.
7. Road Access or Easements
If the vacant land lot has road access, it’s important to know if there are any easements on the property. Easements allow for the private use of public roads and rights of way.
There are two types of easements: Incorporated and unincorporated. If your property doesn’t have a legal subdivision or plat map, you most likely have an unincorporated easement on any nearby streets or roads that cross your property.
Things to keep in mind:
- It’s important to consider if the vacant land lot has access to a road
- How far away is the closest town
- To ensure your property has road access, you might need an easement from your neighbor to build an access road connecting it with public roads outside of your property if there aren’t already connections.
8. Property Taxes
When looking at how to buy vacant land lots, one of your first concerns should be the property taxes that will be charged on the property. Any home or other structure built on the land will add to the property tax bill.
You can find out how much these taxes are by contacting your local government offices or searching online for information.
Looking for resources? Find out how to calculate taxes or visit your local tax assessor’s office.
Final Thoughts
There are many advantages of buying vacant land. The buying process for vacant land isn’t that different from the buying process for a home. You’ll need to do your due diligence, take care of legal requirements, and pay the necessary fees to complete your purchase. You should research before making any investment so you don’t end up paying more than expected or regretting your decision later on down the road.
Despite it being a somewhat complex process, these tips for buying vacant land can help. You may need to jump through some hoops with zoning and permits and there are other cost considerations to be aware of, but you can look at vacant land as a potentially great investment opportunity. Just be mindful of the pitfalls – this guide will help!
If you’re looking into your options for financing if you’re buying vacant land, check out our web page – Vacant Land Loans. To learn more, give us a call at (808) 930-1400 to make an appointment with a loan officer today. We’d love to help you make your dream a reality!
