Real Estate Investing

Many a couple has dreamed of buying “their own piece of the world” and building their ideal home upon it. However, the all-important step of buying the right land requires a lot more time, work and careful consideration than many people could possibly realize. The following are some important things to remember when buying the perfect lot.

Don’t buy the cheapest: Sure, there are still some good deals out there. But if your lot is super cheap, there’s probably a reason. You could end up paying a great deal more in the long run.

Financing: Pre-qualify for a mortgage so you know exactly how much house you can afford. As for land, the days of paying cash for land are practically over due to rising real estate and building costs. Certainly save up as much cash as possible, but know that the majority of people seek loans and that’s OK. If you plan on breaking ground within 90 days, consider a 90-day note on the land and then roll it into your construction loan. This is risky, however, because many things can arise to delay construction.

Choose your house plans: Some builders recommend choosing your house plan before the land so you will know factors like whether your lot needs to be sloping to allow for a walk-out basement.

Identify water and sewer sources: Water can come from the city or, if the land is farther out, it can come from a well or spring. Sewer service can also come from the city or, if the land is farther out, a septic tank can be used. In that case, before buying the land, request a perk test proving the land has been approved for the construction of a septic tank that is adequate for your desired house size.

Location: How close is the lot to your work? Good schools? Restaurants and shopping? Is there a pizza delivery service nearby? Take into consideration any special needs you and your family may have when choosing location. A hospital or golf course may be important to you. Also consider whether the surrounding homes are large enough and valuable enough to warrant building your desired home in that neighborhood. Think twice if the neighborhood’s average property value is more than 20 percent below what your property value will be when all is said and done. If the location is far enough removed from civilization, there may extra costs incurred during the building phase for materials delivery and labor costs.

Technical stuff: Zoning, easements and property boundaries. They may be an afterthought, but these issues have brought many a landowner into court litigation. Check with the local government. Is the house size you desire even allowed on that site? Is it zoned residential? Is the surrounding area zoned residential, commercial or industrial, and is a zoning change expected any time soon? Is there a minimum width requirement on the land? Also arrange an easement if you will need to drive across another person’s property to get to your own. Determine who will manage the upkeep of the roads and any costs you might incur. Ask the seller if you can see a land survey showing where your property ends and your neighbor’s begins. Is the property in a floodplain? This means mandatory flood insurance. Don’t get snared by an overlooked technicality after it’s too late.