8 Things to Think About Before Buying Land

March 20, 2019 by Jorge Lopez

Stump and cottage in meadow
Land is a scarce commodity, but there are always vacant lots and acreage available for purchase in the Houston area. Whether you want a half-acre lot in a residential neighborhood or a hundred-acre farm outside of Katy, you have options. But there’s a lot more to purchasing land than meets the eye.

Eight Things to Think About

 Buying land isn’t as straightforward as purchasing a single-family home in a residential area or investing in a downtown loft in a well-established condominium. You’ll have to be aware of nuances and work through them in order to find, acquire, and use a suitable piece of property.

As you begin your search in the Greater Houston area, here are some crucial questions to ask.

1. What’s your purpose for the land?

The first thing to weigh is your purpose for acquiring the land. Why are you buying it? There are lots of potential reasons.

  • Buy and hold raw it as an investment
  • Purchase land to build a single-family home
  • Buy a lot to build a business
  • Purchase undeveloped lots for hunting, farming, or agricultural purposes
  • And more

Your intentions for the property will dictate, to a significant degree, how you buy it and what sort of due diligence you ought to pursue. For example, buying and holding raw land is a long-term investment that could require 10 or 20 years to play out.

Buying a plot to construct on, however, could involve starting the building process within a matter of weeks.

2. What are the zoning requirements and restrictions?

You should never presume you can do whatever you please with a piece of land … even if it’s out in the country. Local governing bodies administer zones, ordinances, and codes that will limit what can be done with a property, and may require extensive steps to obtain approval for any changes.

“For example, there may be required setbacks from the edge of the property, mandates to build a sea wall if you’re on the waterfront, or a percentage of the land may be restricted from development,” real estate expert Devon Thorsby writes. “Getting an exception to the rule isn’t easy, and there’s a good chance it will be denied.”

You can’t expect to ask for forgiveness later. It will cost you dearly. Do your research on the front end, or you’ll find a big mess on your hands.

3. Are there any easements?

 In many cases, a parcel of land isn’t as simple as it appears on Google Maps or Zillow. On large parcels of land, easements may be in place.

For example, an electrical utility company may hold an existing easement on the property so it could eventually run a power line through the lot to get access to another. You won’t be able to build on this kind of easement or restrict it in any way.

It’s also possible that you’ll need to obtain a new easement in order to gain access to your lot or reach a distant portion of the acreage. It’s wise to research your options prior to purchase.

4. Are public utilities available?

Unless you’re planning to buy and hold, use the land for agricultural purposes, or keep it as is, you’ll probably require utilities such as water, power, gas, phone, and Internet access. Don’t just assume the land is already prepared for these. You may be in for a rude surprise. 

5. Are there any environmental hazards?

“You might think that you would be able to spot any deadly environmental hazards just by walking around a property. However, many environmental hazards can’t be seen by the naked eye,” Realtors Land Institute explains

“They can range from toxic runoff in the water, leaking underground pipes contaminating the soil, and improperly stored chemicals from previous owners.” If there’s any doubt, you’ll want to run tests to ensure the property has no environmental hazards.

6. How will you finance?

Now let’s talk money. This is often a huge sticking point for the average buyer. (Of course, this will depend on how you intend to use the land.)

If you aren’t planning to build a house immediately, you’ll need a lot of cash up front. Banks are wary of giving out money when no physical structure is involved.

You’ll need at least 30 to 50 percent up front. In extreme cases, you may need to be an all-cash buyer.

Even if you intend to pursue construction right away, financing can be tricky. Because there’s no existing collateral for the bank to hedge with, you’ll have to have excellent credit and supply a substantial down payment.

Before going too far down the road of purchasing, it’s smart to brainstorm options and get creative with some different financing strategies. You’re better off being over-prepared than not having a range of options to hand.

7. What are the tax obligations?

It’s a sharp tactic to take a look at the public records and see what sort of tax numbers will come into play. Occasionally, for whatever reason, you’ll spot a property that’s required to pay abnormally high taxes in proportion to its value. Generally speaking, a reasonable tax bill should be just a few percent of the full market value.

8. What does the future hold?

Whether you’re buying with the intention of living on the property for the rest of your life, or it’s purely an investment you plan to resell down the road, it’s critical to keep an eye on the future. Try to picture what the surrounding region will look like in five, 10, or 15 years.

Is the area being developed, or are people moving out? Use common sense and talk to homeowners and real estate professionals who have experience in the local region. 

Buy and Sell With Green Residential

For more than 30 years, our family has been heavily involved in the Houston real estate market. From property management to buying and selling real estate, we’ve helped thousands of clients accomplish their personal and financial objectives through smart, educated transactions.

If you’re interested in selling your home, buying real estate, or investing in rental properties, we’d love to help out. Please feel free to contact us at your earliest convenience!

Jorge Lopez

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