Everyone has heard the expression: “Buy land, they are not making any more of it.” While this is an accurate statement, many struggle with the uneasy and sometimes cumbersome process of purchasing land. Experience is often the best teacher, but for the novice entering unchartered waters it is important to have a guide as to what you should look for prior to pulling the trigger.
First, make sure you visit the property to visually inspect it. A 20-acre lot might sound like a great piece of property, but it is cleared or filled with trees and brush? Is it on a hill or flat land? Along these lines, it’s critical that you identify the reason you need to purchase the land; is your goal to develop the property as residential, commercial, or industrial? Once this is established you want to assure that the property is zoned for your intended use. If the zoning doesn’t meet your needs but the location and property specifics are ideal, you can bring a detailed proposal before the town planning and/or zoning board to ask for waivers or variances. Make sure you have an accurate and detailed survey, so there is no confusion over boundaries and no hinderances that could negatively affect your intended use.
A critical part of the decision process is establishing if there are there any environmental issues on the property which could include (but are not limited to) oil spills, chemical spills, wetlands, etc.? These issues could become a cost nightmare, and often remediation will fall to the seller unless the purchaser is careless and doesn’t do the necessary homework. These concerns could derail potential plans, as sometimes environmental variables can result in a massive cleanup project that could include years of permits, approvals and inspections. These scenarios are less than ideal for a novice investor.
You need to know if there are any easements on the property. Does anyone else have the legal right to use your property, such as for power lines, or a driveway or walkway to someone else’s property? Will you need an easement yourself to access the property for your intended usage, if there isn’t sufficient street or driveway access? Are there public utilities that are close to the land? If there are already gas, electric, and water on the property or close by this should not be a major issue, however if the public utilities are far away it might be costly to bring these services to the land.
Make sure you work with a reputable, established title company that can address any concerns such as tax liens on the property. Sometimes a lien can be worked around as a negotiating piece at closing. Finally, you need to determine if there are any other restrictions on the property; if, for example, the property is residential, is there a homeowner’s association that has restrictive rules that could hinder and frustrate your intended plan? If the property is commercial, is there anything in the deed that does not allow certain structures or uses of this land?
For the experienced investor, a checklist and due diligence results in confidence in the process. For a novice investor, ignoring some of these steps can result in a failed investment. While this is by no means an exhaustive list, it’s a starting point highlighting some considerations before purchasing land.
