You can always buy a new house, but you can’t always buy land. Once it’s sold and developed, that’s it. But based on your needs, and your family’s needs, is buying land a smart decision?
The short answer: it depends. When buying land to hold as an investment, there’s a possibility that it will become devalued overtime. If you want to purchase the land to build on, there are several factors to consider, and it’s important to do your research.
If you’ve made the decision to buy land, know that it is not going to be a short-term project. You need to budget appropriately, and make sure you have road and utilities access available.
Some plots of land people buy are in existing subdivisions where roads are paved and accessibility to and from the land is easy. However, some people choose to purchase land in a more secluded area where they can have more privacy and be away from neighbors, or have a unique beautiful view. If that’s the case, there may be a lack of road access.
You’ll need to create the access, and it’s often expensive. You will also need to pay attention to zoning. Creating road access will involve potentially needing to hire a logging company or an arborist to remove trees, as well as an excavation contractor. Additionally, you will need to ensure that the lot isn’t landlocked by neighboring parcels. If it is, you will have to apply for a right-of-way easement. The easement will allow you the rights to the adjoining properties.
If you’re buying land to build on, you will need to ensure that you’ll have utilities access so the home will be liveable. Electricity, water, sewer, and internet service are going to be needed.
- Electricity: You can install a solar-generated system if you want. Otherwise, if there isn’t an electric line already set for a building site, a local utility company will need to run one.
- Water: A well or off-grid water system will need to be installed if a municipal water supply is not available. If you have to truck-in water, it will be inconvenient and costly – but is another option some people have chosen.
- Sewer: Before construction begins, a septic tank needs to be installed if a municipal sewer connection is not available.
- Internet service: Although some people choose to live without internet service, a majority of the population lives with internet access. Look up if an internet connection and cellular coverage is available to the property. You may have to switch phone service providers, or run a fiber-optic cable to the site for internet access.
Finances With Buying Land
It’s imperative to know how much you can afford before you consider buying land, as with any large purchase. Determine your budget, and have proof of funds available.
Oftentimes, experts recommend buying land with cash. If there’s no structure on the property, a bank can’t leverage the purchase of land the same way it can with a home purchase.
If you don’t have enough money in your savings to buy land with cash, you can get a land loan. There are different types of land loans. They will depend on the type of land you are purchasing. Raw land, or improved land that has already seen some development. Loans for raw land are riskier than loans for improved land, and more difficult to obtain. If you qualify for one, chances are you’ll have to put a substantial amount down for your down payment. They usually have higher interest rates too.
Lot loans aren’t going to be the only form of financing that you will need to have. It is likely that you will also need a construction loan so you can build your home on the land. However, you will have a much better chance of being approved for a construction loan for the building you would like to put on the land, because the house you’ll build will be collateral for the loan.
Although a lot more steps are necessary, a lot more research needs to be done, a lot more time will be involved, and it can be riskier to purchase a lot of land to build on; the reward as the end result can be great. If you are looking for land to buy, or need to sell your existing home to move into your new home on your plot of land, expert real estate agents at Trelora can help.