Buying land is probably the biggest investment a person will make in their lifetime. It is vital to get it right. I say that it’s a bigger investment than purchasing a house because not only are you buying the land, but you also have to then build your house along with all the infrastructure. A significant amount of planning is involved.
Having recently gone through the process, I’ve spoken to several people who are interested in doing the same thing we are. Buying some property, building a house, and living the good life. Only, it’s not that simple. A lot of work is involved, and even more planning. We’re not going to get into depth on the planning, but there are three pieces of advice I’ve given people that I’ve talked to. These are the three biggest mistakes people make when buying land.
- not doing your homework
- overpaying
- impatience
Not Doing Your Homework
It wasn’t until I had a purchase agreement accepted by the seller that I realized we needed to ensure we could actually build on it. I was operating under the misinformation that as long as a parcel was 5 acres or more, we could build. That couldn’t be further from the truth. The fact of the matter is that it depends entirely on your local zoning authority and the ordinances that have been put into place.
This had a mind blowing effect on me. I couldn’t fathom the fact that you could own several hundred acres, for example, and perhaps not be allowed to build legally. The fact that our property was 40 acres seemed to me that we could do whatever we wanted. Luckily, we did meet the minimum restrictions so we were allowed to build. But were this not the case, we’d be in trouble.
It is vital that you do your research and know what your ordinances are. This was the main reason that I secured a second job as a zoning administrator. I had read the ordinance, but I couldn’t decipher the language as it pertained to us. The knowledge that I gained from that job is invaluable.
Meet your local zoning authority. Go there in person and physically shake their hand. Be polite, talk about what you’re intending to do. The more polite and cordial you are, the more they will be willing to help you. Zoning authorities get a bad name because they are the ones who tell you what you can and can’t do. But it’s important to note that they do so by determining the language of the ordinance as it pertains to your situation.
They are governed by the rules set by a body of people; they’re not just making rules up as they go. Be nice, and they are more than happy to help. Explain what you’d like to do, and they can help point you in the right direction as you are searching for land. Often, people would ask me, “is this lot buildable?” In all honesty, I wasn’t supposed to help them.
It wasn’t my job to look at parcels on a case by case basis, but I did it anyway. As long as people were polite and forthcoming with me up front, I had no problem taking a few minutes to look into a property. I’m not saying that every authority will do this, but they certainly will give you the tools to determine it yourself.
Get a copy of the ordinance; read it thoroughly. Most authorities will print the ordinance for you, for a fee. Or, you can get a copy online. If you have questions, ask. Most importantly, make sure you understand the language so that you can positively identify buildable lots. You don’t want to be getting into a jam later after having purchased a lot that is not buildable.
On the whole, sellers are respectable people. However, if you look at the fine print, oftentimes it will say that it is the buyer’s responsibility to determine if a lot is buildable. Sellers won’t necessarily offer an un-buildable lot at a cheaper rate, so there’s no indication on your part unless you do your homework. Do your homework; it will save you immeasurably in the long run.
If you have questions about specific ordinance language, leave a comment below or message me from the sidebar. I will do my best to help you out, but it’s imperative that you learn your local ordinance.
Overpaying
We are guilty of this, and it has hurt our opportunity for growth. Thankfully, we didn’t overpay by much, but we’d still be much better off if we had paid less. The reason for this is that when buying land, you have to consider ALL of your expenses, not just your initial investment. This is all determined by the actual property that you’re buying.
If it already has a driveway, well, and septic then you’re ok paying a little bit more because you don’t have to invest in these items. If it doesn’t, keep in mind that you’ll soon be paying upwards of $50,000 more, depending on your location.
If you purchased property like us, then you already have a house mortgage. Buying land will create a second one. Make absolutely certain that you can afford it, comfortably. By stretching yourself too thin and only making the minimum payment, you won’t leave any extra expenses to actually make progress on your land. Even worse, you won’t have money set aside for savings or unexpected emergency situations. This is supposed to be a joyous event. We don’t want anyone to go bankrupt from purchasing property, be realistic with your budget.
Our plan was to not exceed $60,000. With our house mortgage that we had, monthly bills, a new mortgage for the land and savings contributions we wanted to ensure that we could pay for everything and still have enough to save for a well, septic, driveway, and building the house.
Even though we almost spent double our initial goal, we crunched the numbers. We knew that we could afford the higher payment, even if it meant that our progress would be slower. And it was slower. It took us a year of saving to afford the driveway and the electric. It took us another year to afford the slab. And then we had to take out another loan for the rest.
Our situation doesn’t necessarily mimic yours. Our house mortgage was pretty small and the payments on it were reasonable. Because of that, we knew that we could afford a little more. The bottom line is that you are in charge of your finances. Be reasonable, and think of the bigger picture.
Oftentimes it’s easy to look at the little selling price and say, “yeah, we can afford that.” Look at the bigger picture with your building goals in mind. Consider the extra expenses and also include your savings and emergency funds.
Being Impatient
I was guilty of this as well. Once Bre and I made the decision to look for land, I wanted it NOW. I’m glad that it didn’t happen that way, because we weren’t meant to. I still had another year of paying off debts and then another year of saving for a down payment. Plus, if we had bought land then, we wouldn’t have bought the land that we now get to enjoy.
The biggest problem with being impatient is that it leads to either: paying too much, or settling. If you pay too much, you run into the problems that I just mentioned above. Settling is often worse. Think about it; this is the property that you’re planning on building your dream house. The house you’ll live the rest of your days in. If your property doesn’t take your breath away, will you really want to live there forever?
Now, maybe that’s not your goal and then it’s ok. But for what our goals were, I knew that if a property wasn’t perfect, we wouldn’t be happy. In those two years we did our homework. We researched a ton. We were subscribed to zillow and realtor.com for alerts when new parcels came on the market. We checked Craigslist daily. Even though I knew that we couldn’t afford to buy at that time, I needed to stay focused on why we were working so hard to save.
It also allowed us to get a good feel for the market. We were able to quickly determine if a property was “worth” the asking price. We still went out and walked around properties; we drove and looked at vacant parcels. We were able to hone in our list of “needs” and “wants” when it came to the property we’d be buying. By taking the time to do so, we were rewarded in the end.
Obviously, this has to coincide with your budget as well. If your perfect property is hundreds of acres on a private lake with mountain views, well you just might not be able to afford it. Be realistic with your needs, take the time to research, and don’t settle for less. You’ll be glad in the end.
If you’ve followed my advice and listened to the 3 biggest mistakes people make when buying land, hopefully you’ve gained a better understanding of the process. I want you to be successful when buying land. I want you to accomplish your goals. Put in the work, and you’ve got a better chance of doing so.
If you have more advice to offer for those looking to buy land, please post it below!