Wide-open spaces might be the hottest commodity out there in today’s market. And it’s easy to see why. Standing on an untouched building site on acres of your own vacant land, with surrounding sunsets or forests or starry night skies, it’s easy to envision exactly what your dream home could be. Of course, there is plenty to consider before you make the big commitment to buy vacant land, and then potentially build on or otherwise develop that land. Let’s explore a few of the pros and cons of investing in undeveloped land.
Undeveloped Land Explained
Think of vacant land or undeveloped land as a completely blank palette – it’s simply the land in its most untouched or natural state with no existing infrastructure. It’s never been used for farming or ranching. There are no roads leading in or out. Just the land. For years, many buyers disregarded raw land for investment purposes considering it too daunting a task. However, that mentality has shifted as real estate investing has become increasingly popular and many are leaving urban centers for more peaceful existences in rural areas.
What are the Pros and Cons of Buying Vacant Land?
While the beauty and freedom of buying undeveloped land can be strong attractants, there are a variety of factors to consider to avoid unintended challenges and heartache if things don’t play out as planned. Let’s take a look at the pros and cons.
The Pros of Buying Undeveloped Land
- Quite often, vacant land is more affordable than developed properties.
- Unlike the hottest properties in your favorite resort town, you typically won’t get into a bidding war with other buyers over undeveloped land; there’s simply less competition.
- The return on investment (ROI) can be substantial with the right vision and tools to develop the land properly and profitably.
- Because it lacks infrastructure and utilities, property taxes on vacant land tend to be lower than developed parcels.
- Undeveloped land offers dreamers plenty of flexibility in what and how they want to build.
The Cons of Buying Undeveloped Land
Like any major real estate transaction or investment, it’s important to weigh both sides of the coin. Here are some very important considerations that can complicate a undeveloped land purchase:
- Assuming you’re not paying cash for the entirety of the property, and need to finance a portion of the purchase, vacant land loans can require a higher down payment and a detailed plan of how you intend to develop it.
- Zoning restrictions can create roadblocks for those looking to buy undeveloped land. Some land is zoned so that nothing can be built on it, while other parcels are zoned commercial or mixed-use, both of which will affect a large raw land purchase.
- Along these lines, conservation easements are another consideration. Often, these provide important protections for the land you’re looking to buy. However, they can also be incredibly restrictive if you plan to build, hunt on the land, or otherwise develop it.
Financing Vacant Land
As mentioned above, financing undeveloped land can be a little more complicated than a simple home loan. That said, there are some powerful and comprehensive resources available for those interested in purchasing vacant land. If you’re considering buying undeveloped land for a specific purpose, make sure to explore these organizations:
- Conterra – Conterra Ag Capital provides farm and ranch real estate secured loans to agricultural producers across the United States. For those looking for financial support to set up farming operations, extend current farming practices, or whether a particularly difficult agricultural cycle, Conterra offers managers throughout the country who can work directly with buyers.
- Outdoor Lending – In addition to agricultural land purchases, Outdoor Lending assists agents handling premier real estate deals obtain the best financing options for their clients. These purchases can include farm, ranch, hunting, resort, and recreational properties across the United States.
- Farm Credit – Farm Credit’s mission is to support rural communities and agriculture with reliable, consistent credit and financial services. The organization is committed to the viability and vibrancy of the country’s rural communities through a steady flow of capital.
Scouting the Land
Perhaps the most important thing to do before you buy undeveloped land is to give your dream property a good, hard look. Work with your real estate professional to better understand the pros and cons, opportunities, and obstacles that undeveloped land might present. Doing so will help you understand what might be involved in making the investment viable, including:
- Putting in roads
- Establishing utilities such as propane or natural gas and electricity
- Water availability, e.g. a well on-site or the need to tap into city or county water sources
- How your future neighbors might feel about your development plans
- Geological features to consider
- How buildable the land is, including whether or not your actual building site presents any steep land surfaces, rock formations that might require augmentation or removal, wetlands, or other wild land conservation considerations
Vacant or undeveloped land really is one of the last great possibilities of our time, offering potential buyers everything from an investment opportunity to the perfect place for your dream home. Talk with your land real estate professional today to learn more about vacant land available near you, and what it might take to buy and then build.
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