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One morning, you scan through the classified real estate listings and spot an ad for what appears to be an ideal slice of land: “Forty acres, part-wooded – part-cleared, south-facing slope, year-round creek, $28,000, low down payment, low monthly payments.” If you witnessed this, you may be thinking you’d found yourself the investment of the entire decade.
Obviously you’re going to want to take a look. You arrive only to find that the place is even better than you’d been expecting. Your heart is set, and already, you’re setting plans in motion as to where you’re going to position the house and erect the barn.
The agent notices that you’re already sold. He asks you to make a choice – either down payment or earnest money. You’re well aware that if you don’t make a move right now, someone else is more than likely going to snatch this deal of a lifetime from your fingers in an instant.
But wait. Prior to letting go of your cash, which is likely to be non-recoverable, let us briefly assess some of the dos and don’ts when investing in land.
Is there Road Access?
Access rights are primary to owning any piece of land. Thus, you must be certain that permanent, legal, and transferable access is clearly specified within the deed. Avoid investing in any piece of property without this.
It’s an imperative to be entirely sure that no one is able to stop you from accessing your property. Should access be obtainable through annual payment, which is the scenario whenever dealing with a number of government agencies, be sure to find out if the rights are in fact transferable should you decide to sell at some point, and that those same rights are non-revocable.
Further, learn who is responsible for the road’s maintenance.
Drainage, Water, and Sewer
This is also of critical concern. That creek which runs across your land is indeed beautiful, but do find out if you have the right to make use of it. As it happens, your water supply may come from a city’s watershed, and if so, you’ll be unable to utilize even the smallest drop of water from the creek legally.
What’s more, if you have livestock, the law may demand that this livestock is maintained at a distance from the creek. Or indeed, the law may not permit the installation of an outhouse or septic tank.
Thus, it’s probably wise to avoid investing on a watershed, excepting that you have it in writing from the city a specification of your rights and you know that you can comply with every detail specified in that agreement.
Do also be aware that in some areas, outhouses are illegal. If so, the homeowner must choose from either a septic tank being installed, or be hooked up with a public sewer system.
Utility Availability
If your residence is at some distance from the nearest power line, companies do actually have the right to make a refusal to provide you with a power supply.
Thus, before making any investment in land, know for sure about power availability.
Mineral Rights
Many of us believe that mineral rights are of minor issue. But if you don’t hold them as a landowner, it can mean big problems. The point here is that even if, to date, there has been no discovery of minerals on your new land, there remains no guarantee that a discovery will not be made in future.
And should this occur, your land could be turned into an industrialized haven for bulldozers.
Protect Yourself
Even if, after all this, you do decide to make the investment in a parcel of land, irrespective you’ve placed down earnest money, you can still opt to make the final purchase based on written contingencies. And these qualifications are at your call.
Be certain that your earnest money agreement does in fact cover legal access, water, and mineral rights, and that the seller must deliver a deed which conveys good title. And get yourself a title search which dictates the property’s legal history. This way, you’ll know about any encumbrances on the land, and you’ll know that the seller does actually own the property.
Further, make sure that any money that is handed over to the seller is placed into an escrow account. This money will be returned to you on the provision that the owner fails to convey good title.
Visit http://www.landcentury.com/land-for-sale/ for a prime catalog of land currently on the market.
There is a lot to think about and research when you are thinking about purchasing land. You have provided some very helpful tips to those that are considering it. Thank you for sharing!
I learned recently the importance of buying a piece of land that has road access. Buying in the path of progress is vital. It can mean life and death when it comes to a future potential real estate investing deal. Great Article!
Gerald Harris´s last blog post ..The Federal Government Should Follow the Constitution and Sell its Western Lands
Buying a piece of land requires a lot of research. You have to be smart by checking out a lot of details of the land that you intend to buy. Better be a smart buyer than a regretful buyer. =)
Thanks for this post!
Rob T – Easy Land Sell´s last blog post ..Selling Land Online, Advise and Tips on the Best Ways to Sell Land Online
My parents are thinking about buying a lot of land to build a new house on. I liked that you pointed out that it would be smart to consider if a piece of land has road access. It does seem like you would want to be able to get things like excavators to an undeveloped piece of land easily.
Buying raw land is a very risky investment because it will not generate any income and may not generate a capital gain when the property is sold.
Good point. What do you think would be a better real estate investment?
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I’m planning to purchase a land where the commercial building will be built. Since there are a lot of trees within the area, I’m thinking of hiring a land clearing service instead. I’m glad you shared this; I’ll make sure to never invest in the watershed because according to you, this can be illegal. I’ll also keep in mind to verify whether the community would be able to provide stable utility power.
It’s been a wonderful article that I have read till now. I like each and every point of this article, but one thing I most like and that is “Utility Availability”. This point I loved this point most out of this whole article. Keep on sharing this kind of article and motivate us.
Research is key when investing in raw land. I find that road access and utility access are some of the biggest drivers in cost in the market.
Thanks for informing me that some power companies might refuse our application if our house doesn’t have a nearby power line. I might want to take this into account considering that our family is looking for home lots for sale. Before purchasing anything, I’ll make sure to check power availability and how it can be connected to the public sewer system as you advised.
As you mentioned, I want to take a look first before purchasing any type of land. I was thinking of browsing online for any posted lots for sale but I think it’s best to do my own research first. I’m glad to have read your article and I’ll definitely make a decision after consulting a professional directly.
Thank you for sharing this information. This is very useful. We can learn so much through these article about investing in real estate.