What to Know About Buying Vacant Land
Dos and Don'ts of Buying Land
There are a number of reasons why someone would want to buy vacant land instead of a property. It’s cheaper, you can have more land per the amount of money you spend, and land usually appreciates in value over time. While buying vacant land is a common practice in rural areas, many first time buyers tend to make certain mistakes.
It’s important to familiarize yourself with the Dos and Don’ts of buying land in a rural area.
Do have a clear intent for purchasing land. If you are buying land to build a home upon it, your merits for good land would be different than if you were looking for land recreational enjoyment. You would look for its distance from main roads and public services. Whatever your reasoning to buy land is, you should have a clear idea of why you are buying vacant land so that you can search accordingly.
Don't expect a lot of financing options. Though there are loans available for buying land (land loans), they might not be as readily available as a typical mortgage loan. Even when the loans are available, there is usually a cap on how much you can borrow. If you are able to pay cash for the land, that might open up your options considerably.
Do look for multiple options. This is common between vacant land and properties. Don’t be satisfied with the first piece of land you see. Even if, by a rare chance, the first site you visit is perfect, it’s still a good idea to look into different options. If nothing else, it would give you some good comparable points, and you can make an informed choice.
Don’t take the title for granted. For land that has been passed from generation to generation through inheritance, title issues are not uncommon. You need to be sure that the land that has been transferred to you is free of any liens or ownership claims, and you will be the sole owner of it. You can get a title exam done for the land or buy title insurance. In some cases, the seller might be persuaded to buy the title insurance for you to prove the claim that they indeed have full rights on the land.
Do visit the property. There is nothing like taking in “the lay of the land” to make up your mind about whether you are making the right decision. Based on your intention for the land, you should have “must-haves” and “good-to-have” lists. There will be some things that you will absolutely need, and then some that you can live without. From an investment perspective, understand that what's undesirable to you now will be undesirable to investors later down the road. You should also confirm the acreage, as accurately as you can. And you may also need to get it environmentally tested.
Don’t forget about the tax. Vacant land is usually taxed higher than residential property tax. Still, since it’s appraised at a lower price, the overall tax can be lower than that of a residential property tax. For example, a piece of vacant land might be taxed at $500 a year. But if you build upon that land, and turn it into a residential property, the yearly tax may reach up to $1,500 to $2,000 month. It depends on the area and the appraised value of the property, but it should give you a fair idea of the tax difference.
Jefferson Real Estate
Office Phone: 719.836.2615