Though many individuals purchase undeveloped land with the intention of building their dream home, there are other motivations for buying vacant land—for example, it can be a great investment for developers, subdividers or land speculators. Investing in vacant land does require some research in order not to pay too much for land that may or may not have worth and potential. Despite the current state of the real estate market, many undeveloped properties are currently undervalued, especially when you consider easy methods to make a fast profit, such as subdividing a larger property.
If you’ve found a plot of vacant land you think you want to purchase, there are many things you need to know that can’t be discovered by making assumptions based on a map or the seller’s description. It’s important to visit the land and walk around it to see what is there, and what might not be there. For example, you may find that there are no roads to access your land, which could hurt its investment potential unless you procure an easement. There are many features of the land that might not be disclosed on a simple map or the seller’s description of the land, but are readily apparent upon setting foot on the property.
Also, when buying any land, whether vacant or developed, you should have a land surveyor conduct a survey of it. Depending on the type of survey deemed appropriate for your situation, the survey can include boundaries, slope and layout, natural features, roads and utilities, and other features that will affect the value of the land.
In some ways, buying undeveloped land is an entirely different process than buying a property with a house already on it. Remember, when buying vacant land there is no proof that a house ever could be built on it. It’s up to you to do your due diligence in determining whether the land will meet your needs. Before investing in vacant land, you want to look at four key factors:
- How is the lay of the land? You might want to avoid properties in flood zones or containing sharp hills, rough terrain or other desirable features that could make development difficult. Additionally, lots with rectangular or square boundaries will be easier to resell than oddly shaped lots.
- How accessible is the land? Are there roads, and are they well maintained? Are they paved?
- Are utilities available? Is there a source for water, electricity and/or natural gas? Is there provision made for wastewater? If these aren’t available, you’ll need to arrange for them if you want to develop and sell the land to a builder or home buyer, or build a home for yourself.
- How is the location? Is the land in an up-and-coming area where real estate is likely to appreciate in the coming years? Is it zoned residential or commercial? Is the land in close proximity to structures, businesses, land features or other things that could either add value or take value from the land?
Finally, before buying vacant land as an investment, you should know what you’re going to do with it. You could build a home or another structure, and then sell the property as developed land. You could have the land re-surveyed and subdivided into several smaller properties, which can then be sold to individual buyers. You can also hold on to the land as an investment for a few years until its value has increased. If you have a specific plan in mind, check zoning regulations and other rules to be sure that your plan is possible on the site you have selected. For example, you may be unable to subdivide the land you have purchased, or zoning regulations may prohibit the type of building you have in mind for the property.