Owning land is a dream that many Americans have. For some, it can be the future site of their retirement home; for others, it may be a way to achieve financial freedom with an off-grid homestead, or tiny home.
Others may just want a little peace of paradise to escape, too—whatever the reasons are, this article will go over what you need to know when buying land for a future build, and what hidden costs you might not be aware of.
Land Use Restrictions
The number one thing people don’t consider when buying land is what the building restrictions are. It may seem counter-intuitive that there even are any—if it’s your property, you should be able to build what you want, right?
This is unfortunately not the case in many places, so do your due diligence and check a few things out before you go buying your dream spot. Location means everything, so start with the specific county ordinance.
You can call or search online for information on the type of building you want, and see what limitations there might be.
For instance, if you want to put a manufactured or mobile home on this land, it must meet the government's Housing and Urban Development, or “HUD” criteria. The HUD code states that homes built after 1976 are manufactured homes, whereas pre-1976 builds classify as mobile homes.
Mobile homes are usually only allowed in mobile home parks, while manufactured homes built after 1976 are allowed in residential areas, but the difference is key, as mobile homes are sometimes not allowed according to the county zoning.
Search “zoning ordinance” for the county you are looking to purchase land in and make sure the size of the property allows for the size of the building you want to build.
Note that HUD does not regulate RV’s, so they don’t need to follow HUD regulations, but they will have their own limitations.
Check with city bylaws about other any other restrictions and whether the land is zoned for residential, mixed use, or commercial.
Whether you want to build a tiny home, a very large home, or start a small business, bylaws and zoning will get you all the information you need in terms of size parameters and types of builds allowed.
HOA or POA Restrictions
Homeowner’s Associations and Property Owner’s Associations also have a lot of power when it comes to what you can build, and how you can use your land. Check with them about HUD criteria, and other types of restrictions on building and land use.
There will also be annual costs to inquire about. Usually, these matters are disclosed up front during the purchasing stage, but not always. Annual costs may include property maintenance like grass cutting and snow removal, or perhaps there’s a shared pool area, or boat launch access.
Depending on the services that an HOA or POA provides, your costs will vary, and there may also be monthly fees on top of annual fees.
If you were going to pay someone to maintain the property anyway, then it might factor into your budget. Either way, don’t neglect the restrictions and costs that go along with HOA and POA membership.
Legal Access Road
Access to the site is another big consideration when buying land that is often overlooked by excited prospective owners.
Will you need to create legal road access to the site? Are there trees, and other geographical obstructions that will make this more difficult to do? Is the land flat, and close to a main road?
You may have no problem hiking, boating, or snowmobiling to the spot, but what if you want to build or do renovations in the future?
Consider all of the types of vehicles and trades that may need access to the site, and even if you don’t need to put a road in right away, you’ll want to know how difficult (i.e., expensive) it will be, if and when you do.
Get the land surveyed if you’ll eventually need a legal access road. This survey can also be beneficial if you want to build on a site that has various topography. Land surveys cost around $500 on average, and can be a worthy investment.
Before purchasing, ask if the land has already been surveyed, and if it hasn’t, this could be included as one of your conditions of sale.
The listing should also state exactly what kind of utilities are included with the land purchase, if there are any at all. Check to see if there are site utilities like fire hydrants, stormwater, and sewer facilities, as well.
If there are no utilities like water, gas, and electrical already on site, remember that the cost of bringing them in is often paid by the foot. Bringing in power lines 500 feet will be a lot cheaper than having to run them miles away.
Your city ordinance and zoning will be able to help you figure out what kind of public utilities should be guaranteed for the site, as well as what maintenance will be provided by the county. Some trees may be on your property, and some may be owned by the city.
If sewer lines aren’t running to the property, then make sure septic is allowed, or have another plan for wastewater.
If you want to live off-grid, this may not be as important, but plans change, and in terms of resale, it’s good to know what the potential cost of bringing utilities would be if there’s ever a need.
Financing the purchase of land is the main thing that prospective buyers focus on, as traditional mortgages aren’t often given out for vacant land. While initial financing is important, some people forget about annual property taxes as a major part of the cost.
While vacant land isn’t usually as expensive as buying a house (depending on the lot, of course), property taxes can vary from a few hundred dollars to a few thousand. You might think you’re getting a deal on a cheap parcel of land, but if property taxes are high, you may end up losing money.
Annual tax amounts should be clearly outlined in the listing, and if they aren’t, there might be a reason. Most properties will have similar annual taxes as those in the same neighborhood or area, so these are things you can research ahead of time.
Seasonal Changes and Property Maintenance
Okay, so the land looks great in the spring and summer, but what about winter? If the area gets a ton of snow and bylaw requires you to plow it, can you do it yourself? Can you keep the grass cut in the summer?
Not all properties have to be maintained, but it’s something you need to consider. Maintenance is a way of protecting the land: it can signal to vagrants that someone is consistently checking up on the place, and keeps grass and plants from becoming overgrown, which will help when it comes time to build.
Land clearing will also depend on the climate and any extreme temperature changes. Trees go dormant in the winter, which can make them easier to fell if there aren’t any leaves, but hard freezes can cause delays in construction.
Floods, hurricanes, tornadoes, and other major storms are also important factors to think about when buying land. If there’s any threat of flooding, your building may need to be raised up higher than you thought.
Pests are a seasonal problem, as well. In the winter, you may not notice much animal activity, but if you are buying land in an area you don’t know very well, ask about bears, rodents, and insect activity.
Vacant Land Insurance
While it’s not required, purchasing vacant land insurance is a great idea to protect your asset, and to keep you from getting sued. It’s a kind of liability insurance that protects you in the chance that someone gets hurt on your property.
Even if someone is trespassing when they get hurt, you can still be liable. If you are renting the land out to hunters or fishers, or allow anyone else to be on the property, vacant land insurance will cover the medical costs and legal fees in the case of an accident.
This type of insurance can also protect you from other kinds of losses, for instance, if you planted trees and an errant lit cigarette causes a fire, the cost of replacing them would be covered.
Vacant land insurance does not cover any structures on the property, however, so if there are sheds, RVs, yurts, or any other tangible items on the acreage, you’ll want to purchase other kinds of insurance.
Homeowner’s insurance will only be needed once there’s a permanent building or structure on site. If the land is vacant, you won’t need to purchase homeowner’s insurance as there is nothing to insure.
Note that vacant land insurance is usually a lot cheaper than homeowner’s insurance, costing on average around $20-$30 dollars a month.
A new land owner’s worst nightmare is learning that their dream location is actually an old waste site. The flora and fauna may look pristine at the time of buying, but once you go to put in a garden, or dig for footings, you could be met with a nasty mixture of concrete and asphalt, as well as contaminated soil.
A real estate agent can often help you do the necessary research ahead of time, but a proper environmental assessment can give you peace of mind that you won’t have to clean up someone else’s mess.
Once you’re the owner of the land, responsibility legally becomes yours to fix and clean up any contaminants, even if you didn’t cause the problems in the first place. These assessments will also check all water sources to make sure they aren’t polluted.
Get an assessment before you purchase. Include it in the condition of sale. That way if there are any environmental hazards, you can decide to walk away.
Market Value Changes
Nine times out of ten, property values increase, even if only a small amount. That’s why property is such a good investment in the first place. While it’s generally a good idea to buy vacant land if the price is right, be sure to do some market value research.
Think about how the site may change in the future. Is the area up and coming? Will there be lots of construction sites that add noise, urbanization, or wreck your view?
While the property may be idyllic at the time of your purchase, remember that cities and even rural areas are constantly changing. Get the scoop on what plans are in store for the area, and whether your vision will remain years down the line.
Those seeking a piece of paradise will want it to stay that way; others who are looking to start a business or build condos will want an area that’s up and coming with a population that’s expected to grow.
Look out for scammers! Never, ever purchase land without seeing it, even if the brochure looks good, and make sure the seller has the right to sell the land. It might seem crazy, but some people will forge documents like the deed or other contracts to get your money.
Be leery of any seller who wants a cash transaction and a quick sale, or is out of state and only communicates by email or text. While this doesn’t necessitate a scam, these are some big red flags.
There are ways to tell if someone rightfully owns the land. The best way is to check the seller’s information with public records at the local town hall.
Even if the seller is legit, make sure there aren’t any delinquent back taxes, as the new owner inherits these debts. Public records also keep track of all tax delinquent properties.
Ways To Offset Costs
Vacant land doesn’t bring in cashflow without a building on it—or does it? You may be able to rent the land out for other purposes that can help to offset the costs.
Property apps like Airbnb and Hipcamp allow you to easily rent out land for camping, RV parking, and yurts, just to name a few alternative options.
Someone may have a tiny home or RV that they want to park on your property, or you could rent it out to hunters and fishers. Look outside the box of bricks and mortar to find other ways to make money off of the property.
Just protect yourself from possible lawsuits with proper insurance, and remember these options may be restricted by zoning bylaws, and other county ordinances, so do your research.
Check out any potential tax benefits, as well. While there aren't as many to claim as owning a home, there are a few ways to reduce your taxable income. You may be able to deduct expenses like property maintenance to offset other passive income and lower your overall tax bill.
If you are serious about purchasing land, find a real estate agent who specializes in this kind of sale. They can be beacons of information, not just with the legal side of things, but with their knowledge of the area.
Buying land for a future build can have a lot of hidden costs, but only if you go into it carelessly. By doing your research, and being aware of the risks, you can avoid having your potential dream home turn into a money pit.