How to Buy Raw Land

How to Buy Raw Land



Buying raw land is not as complicated as you might think. It's much cheaper than buying a home (with fewer strings attached), and probably the biggest step towards an independent future that you can make.Even in a place as settled as the United States, good property is still to be found, especially in rural areas, and often you'll find land that is quite reasonably priced, from around three to five thousand dollars an acre on a small parcel, and less if you buy more. However, you cannot live on raw land, it will have to have a lot of improvements.With today's building costs and the lowered cost of "already built" houses you may be better off looking for house or a fixer upper, or perhaps a foreclosure. Get the help of a realtor to allow you to see everything that is available, raw land and houses. While this article is focused principally on purchasing raw land in the United States, a number of the principles also apply to raw land elsewhere, with variations on laws and loans that you'll need to investigate for yourself.



Steps

  1. Begin with the end in mind. In order to make the right choice, you need to know what you're going to use the land for, and how soon you want to do it. This is especially important if you're getting a loan to buy the land People buy raw land for a variety of reasons:
    • Farming/livestock
    • Building a home
    • Investment based on development of area in the future
    • To diversify one's portfolio.
  2. Save enough for a down payment. If you're getting a loan, lenders might ask for as much as 50 percent down, although 20 percent is ideal.An alternative is to get a home equity loan or construction loan.
  3. Decide where you want to buy. This is by far the toughest step. Buying land is a big commitment — especially when you plan on developing it. If you don't already know where you want to be, and you're cost-sensitive, look online.
    • There are many databases of available raw land. A browse through these sites will give you an overview of the kinds of properties that are out there and what they cost.
  4. Pick a few properties to follow up on. Mark them on a map. It's a good idea to try and mark them in "lots" so that you drive to one area for one visit and then another area on another visit; that way you'll avoid huge drives in a single day or weekend.
  5. Call the seller. Have a list of questions prepared to ask over the phone. You can, of course, email your questions, but it's much better to actually talk to a seller and get direct answers.
    • Some key questions might be whether or not the property has a water source, utilities, or restrictions; whether is it paid off; why they're selling; whether there is there any owner financing; and whether any structures already exist on it and if these structures all have building approvals.
    • One of the most important things to ask about first is whether there is a proven source of water on the land. You'll also want to know if the land can support a  septic system, and if it can be placed far enough away from the intended structure to avoid contaminating drinking water.
      1. The cost of drilling a well and installing a septic system will depend primarily on soil type, and the final price tag can vary widely as a result.
  6. Look at the land. Nothing will clear up your ideas about what kind of land you want better than actually looking at some properties. You'll immediately realize what appeals to you, and what you don't want.Walk the property, take photos, find the property boundaries, and investigate things like structures or creeks or wells.
    • Look for any structures on the property or on a neighbor's property that cross the property line.
    • Check if there are any roads or easements that neighbors use to gain access to their property or that you'll use to get to your property.
  7. Camp the night on the property. This will give you the best idea of the daily rhythm of the area, and neighbors, and traffic - if after 24 hours your enthusiasm for the place has waned, imagine being there for 24 years.You've got to be absolutely in love with it, and then some, before you're ready to buy.
  8. Meet the neighbors. Just knock on people's doors and ask them questions - about the area, the property you're interested in, its history, etc.Neighbors will be an invaluable source of information. Remember that you will live beside them if you buy, so make sure you can tolerate them for an afternoon chat.
  9. Research the property online and via phone. Get the tax ID number and look up what the land was last appraised at, and what it last sold for. If it has a well, look up when it was dug and to what depth - such information always goes on record with a government agency.Look up the plat for the area (it's a county map showing all property boundaries) - are there large parcels around you, which will mean minimal development, or lots of subdivisions? Call the county courthouse and find out about building codes, and whether any development is planned for the area.Find out everything you can about the area's climate, economy, history, etc. - there's an astonishing amount of such information online. Be sure to look for natural disasters too, such as flooding and wildfires of the past.
    • If the land was once used for farming, there may be pesticides or leaking fuel storage tanks in the soil.
    • Waterfront properties often require additional permits and pose additional restrictions. They're also at increased risk of flooding.
    • Find out how much it'll cost to get utilities. If the mains is already passing by the front gate, it's usually cheaper than if the mains has to be brought in from some distance away but the rules vary according to where you are.
    • Alternatively, if you'd rather opt to be more self-sufficient or the mains is exceptionally far away and/or particularly expensive, it may be cheaper both in the short run (and definitely in the long run) to invest in solar panels and residential wind turbines.
  10. Verify the area of the property. Usually you're paying by the acre, so if the acreage is overstated by 20 percent you're paying 20 percent more than needed.Many people from cities assume that property lines run perpendicular to the road and follow stone walls,but this is generally not the case.In fact, "dog legs" and other bizarre divisions of property are commonplace. Ask the developer for a survey, or hire a surveyor.
  11. Make an offer. If possible, write out your own contract, or copy and use one from a book on buying country property.
    • Offer the lowest possible amount for the land that won't be taken as an insult. The lower you go, the more bargaining leverage you have if the seller counteroffers.
    • Properties typically sell for 85 percent of the original asking value. That doesn't mean you couldn't get it for less, but certainly don't pay more.
    • You can't get attached and feel desperate. You have to be willing to walk away from the property. Remember there are thousands of other parcels out there - thousands. The value of land is arbitrary - your goal should be to pay the minimum. This way you have cash to actually develop it!
  12. Keep negotiating. If the seller counteroffers, counteroffer yourself, and expect to meet somewhere in the middle.
  13. Hire a third party to go over the contract and make sure everything is right. This is especially important with owner financing.
    • A title insurer will be much cheaper than hiring a lawyer. And since you're writing the contract, have the seller split the cost of the third party.
  14. Follow up on any contingencies - such as a title check, well inspection, etc. If everything checks out you're ready to close and the property is yours. Make the most of it!

Tips

  • Get a satellite photo of the property to see how much of the land is open, how much of it is wooded, and what other kind of properties are next door.

Warnings

  • Don't expect good tax breaks; you can't deduct the depreciation of raw land.

Things You'll Need

  • Internet for searches
  • Transportation for visits
  • Maps and satellite images
  • Title deeds and knowledge about easements, etc.
  • Checklist of things to ask agent and seller
  • Hire a local realtor that is familiar with the values in the area and can give you a CMA of properties that have recently sold. The fee is paid by the seller, so it won't cost you anything!
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