Buying Land: Look Before You Leap



Have you found yourself dreaming of your own Walden Pond lately? Whether you're looking to build a luxury retreat or you just want a natural escape, the dream of scooping up an undervalued piece of land is an understandable one. But before you break out the flannel, it's 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 when buying land:


If it's an investment, consider it a long-term investment

Land is not a quick flip. You should only plan to buy land if you're going to hold on to it for at least 10 to 20 years. Landholding can protect you against inflation, but its value isn't going to rise quickly.


Pay cash if possible

If you aren't going to build a home on your land right away, lenders will see you as a risk, and you'll have to pay 30 to 50% upfront (if not full price). 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 that don't have fixed rates. 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 don't have collateral in the form of a preexisting home, you'll need to have nearly perfect credit.


Paying all cash is the best option to avoid these financial hurdles.


Review deed restrictions

Before getting your heart set on land, it's important to look at deed restrictions to determine what you can and can't do with the property. You'll 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's not always the case.


Research zoning restrictions

Land may be zoned for commercial use, residential use, or both. You'll have to figure out if the land is zoned for additional structures like detached garages or ADUs. Zoning restrictions can also determine the minimum structure size you can build.





Find out about easement stipulations

If there's an easement on a property's title, you'll 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.