"Buy land, they're not making it anymore." - Mark Twain
If you're ready to invest in land, there are a few things you need to know before moving forward. Actually, there are more than just "a few things." Buying raw land is a complex real estate transaction with many moving parts.
If you're looking to buy land in a state like North Carolina, one of the biggest questions is where to look. Each of the state's regions offer unique opportunities and pose distinct challenges to incoming developers or investors looking for land. Your search for a residential lot in the mountains near Asheville will look vastly different from a search for commercial property in the Outer Banks.
The choices and details involved in the process may seem overwhelming. But if you know the right questions to ask and you know who can provide the answers, then purchasing land can be rewarding and profitable.
It sounds like an obvious question, but it’s absolutely the first one you should ask before you even consider looking at lots. The reason is simple, deciding what you want to do with the land will automatically focus your search. Narrowing your search will save time, trouble and maybe even heartbreak (if you fall in love with a piece of land that isn’t right for you). And if you’re retaining the services of a real estate professional, it will make their job infinitely easier.
Are you looking to build a home (or homes) on the land? Are you interested in developing a commercial property? Is the land an investment that you hope to resell for a profit? Or are you just looking for a remote piece of property where you can park a camper and hide from the rest of the world?
Your purpose also determines place.
“That location question is important,” said Bobby Harrell, a North Carolina real estate professional with Harrell & Associates in Nags Head. “Everything depends on your needs and where you want to be. Do you need exposure? Do you need to pay a premium to be right on the highway?”
Figure that out and then move on to Question 2.
Buying land can be tricky. If you’ve never done it before, you’ll find it’s much more complicated than just browsing Google Maps, calling your broker and cutting a check.
The final cost is rarely the same as the final list price for the parcel. Sure, we’ve all heard stories of lucky land-buyers uncovering buried treasure on their newly acquired acreage. But the sobering reality is that, more often than not, the only surprises found are unexpected expenses and fees.
Inexperienced land-buyers may be shocked by the size and scope of post-deal development costs. There are surveys, fees, permits, legal costs and assorted charges (depending on your state and locality) that are also known as impact fees, mitigation fees, service availability charges or facility fees.
Ultimately, the bottom-line cost depends on exactly what you want to do with the land, but all of those extras can add up.
Once upon a time, American settlers packed their families into Conestoga wagons and headed west to the wide open frontier. Land was plentiful. The process was much simpler then. These days, you can still enjoy the immediate rush that comes from becoming a bona-fide landowner, but don’t let it go to your head.
This is not the Wild West. There are rules… lots of them.
Zoning is ultimately determined by the local government of wherever your land is located. All land within a state, city, county or town is divided into zones and use of that land is restricted to what is allowed within that specific zone.
"You want to allow adequate time to get approval," said Bobby Harrell. "Sometimes the full permitting process can take, at minimum, 90 days. Sometimes as much as 180 days."
For example: You can’t put a shopping center in a residential district and you can’t build a nice ranch in a business park. But the categories are more complex than just “commercial” and “residential.” Each zone can have sub-categories and those sub-categories can have sub-categories. A piece of land can be assigned more than one zone designation at a time. And while zones can certainly be amended, appealed or adapted by amenable government officials, navigating that process probably isn’t recommended for first-time land buyers.
If the land you want to buy is already developed, you'll need to ask about current zoning, codes, covenants and restrictions.
Real estate professionals call it “due diligence” and nothing works better at preventing potential financial disasters.
Here’s a quick rundown of some of the big categories with questions that need answers. (Keep in mind that this is an overview and should not be considered a substitute for professional consultation):
UTILITIES - Are public utilities available? Are electric and phone lines available? If not, how much will it cost to bring in service? Is there a well? A septic system? If there is a septic system, does it perc? According to Seth Williams of REtipster.com, “Perc tests are required in just about every civilized municipality in the world – because the results of this test provide crucial information required to design and install a septic system.” Want a more in-depth explanation? Read this.
ACCESS - Can you get to your property? Is there legal access by road or right-of-way? Who maintains the road?
RESTRICTIONS - Are there any liens, rights-of-way, easements, covenants, or other deed restrictions or encroachments on the property? Are there building restrictions due to factors such as wetlands, water frontage, historical sites? Are there restrictions due to local, state, or federal regulations?
SURVEY - Is there a recent survey? Experts on BuildingAdvisor.com write: “A survey conducted by a licensed surveyor will show you exactly what you will own, and what you won’t own.”
NEIGHBORS - Even if they are acres and acres away, you need to do some basic research on your neighbors and how they will affect the future residents or occupants of the property. Are your property boundaries clearly and accurately marked? Do the surrounding owners agree with your survey? Have there been any disagreements over existing boundaries of fence lines? Are there any facilities nearby that could have a negative impact on land values (landfills, sewage treatment plants, junk yards, industrial pollution).
ENVIRONMENTAL - Will you own the water and mineral rights? Are there any endangered or protected species on the property? Any sinkholes, underground caves, caverns, or mining shafts? How vulnerable are you to hurricanes, tornadoes or heavy rains? Are there items left on the property that need to be removed or handled by professionals? If there are any questions, concerns or suspicions, you may want to contact someone about Environmental Consulting & Due Diligence.
CONSTRUCTION - Is the lot buildable? Is there adequate road frontage to build? Always get in touch with the locality’s building and planning office for answers to specific questions regarding your property. It’s also a good idea to get clarification in writing.
Even if you have lots of experience handling land deals, the best way to handle the transaction is with a team of professionals that includes (at the minimum) a broker, a banker and a lawyer.
Let's assume that you cannot predict the future (otherwise you’d probably just spend your days betting on basketball games and horse races). That's why it really pays to put on your Nostradamus hat and think about the life of your land over the next 5, 10 or even 100 years.
Houses and commercial buildings have a life span. Once they become obsolete, you can rehab, renovate or tear them down completely and rebuild. But the land you own will always be there. Before closing a deal, spend some time thinking what potential negative (or positive) implications may affect your land.
For those buying land as an investment, what happens in the future is of paramount importance. According to Bobby Harrell, those most likely to succeed are investors who use "patient money." But while you can control everything that happens on your investment property, you don't have much power over the world around it.
Elected officials come in and out of office, developers are always dreaming up big ideas and Mother Nature doesn't sign real estate contracts.
Are there environmental factors that may affect the physical properties of the land? Will flooding become an issue? Erosion? Shifting tectonic plates? And what does the future hold for development of the surrounding area? Will your wooded oasis get boxed in by shopping centers, warehouses or high-rises? Will your humble strip mall spark future development? Are there any long-term plans for infrastructure projects (roads, bridges, highways) or zoning and land usage changes?
Hopefully that's enough advice to get you started. While it's clear that the process may take some careful navigation, it can be an exciting trip. Owning raw acreage is like standing before an enormous blank canvas. And once all the paperwork is done, you're free to set about creating a (zoning-appropriate) masterpiece of your own!