10 Beginner Land Purchase Factors You Should Know

Buying land is one of the more overlooked forms of real estate investment with surprisingly lucrative returns. Back in 2014, I bought 5 acres with my brother that we later sold for a lucrative profit. To this day, I wish we had a “What to know about buying land,” guide or know-how.

Little things like the down payment, soil testing, water rights, and future build loans made the process a little bit complicated if I am being honest. The process can appear to be daunting, particularly for first-timers because of all the technicalities and higher down payment requirements.

However, doing your due diligence is vital before purchasing land. This can sometimes mean enlisting professional help, saving more, or and reading up (like you are now!). While owning acreage can be more involved than when you're seeking developed property, research that a beginner must do to overcome the pitfalls.

Here are 10 beginner land-purchase factors explained that you should read as part of your due diligence.  

What Are the Factors to Consider When Buying Land for the First Time?

After being clear about your reasons for land buying, considerations will range from zoning restrictions, soil testing to mineral rights. It could be you're looking to set up properties or farm as a business venture or to own some spread where you can relax and ultimately retire. Since a land purchase is a significant investment, don't rush the process but instead follow these ten steps to purchase land that include;

1. Having Professional Help

When it comes to buying land, working with a real estate or buyer’s agent can be a boon, especially if it’s your first time. You want to find a local professional in the area that you're looking to own a plot, one you trust, and someone who knows the market. In the end, you'll learn of the pros and cons of the acreage you're eying while getting the most reasonable price.

2. Where Is the Land Located?

Proximity, be it to the road, utilities, water sources, or town clerk services, is an essential factor when considering a land purchase as a beginner. Land in a low-lying area could be prone to flooding, while lots that ate in the hills will prove a nightmare to develop. Regional zoning limitations will also directly affect the type of investment you plan to perform on your land.

3. Is It Raw or Developed Land?

Does the land you aim to purchase come with buildings on it, or is it rural and undeveloped? If there are structures on a spread, are they in a condition to help your operations, and is the seller attaching them to the asking price? While some spaces will sell ‘as is,' you can notch down the price you pay if the present property needs rehabilitating or if there's no development.

4. State of the Local Market

Is the local property on a boom or a recession? What sort of industry surrounds the land you're looking to buy? Let's say you want to subdivide the land you purchase, and you must ensure there'll be buyers to whom plots are attractive. If your land purchase is for a farm, the farmers market or restaurants and outlets where your product will be in demand are considered factors.

Related: How to Become a Real Estate Agent

5. Environmental Issues

Take a look at the local environment or the ecological state of the land before thinking you've landed a good deal. There could be issues with the soil being inhospitable for specific operations like farming, or the area suffers perennial drought. In some regions, natural calamities like wildfires, floods, and earthquakes can wipe out any investment you've put on the land in the blink of an eye.

Related: Best Real Estate Zip Codes

6. Soil, Again

One of the essential factors of consideration for new land buyers is the state of the soil. No matter the operation you're seeking to set up on your acreage, the state of your land's soil can be a setback or a blessing. Doing a soil test eliminates any possibility that the plot was once used as a chemical dump site or is endowed with unnaturally high levels of other hazardous elements.

There is something called a perk test that is very vital when purchasing land that you intend to build on one day!

7. Shape and Size of the Land

Before buying land, consider how big is an acre of land and what is its intended use. Getting the map and survey documents of a prospective plot purchase will help align your intentions with the size of spread you'll buy. Only purchase the extent of land that'll suit your needs, otherwise more or less will prove an expensive oversight.

8. Where’s the Water?

Whether you intend to do with your land purchase, water, or potential availability is an essential consideration. For instance, a farm will require plenty of freshwater for crops and livestock, or you'll need some fishing time during your weekend getaways. Does the seller own the rights for water bodies or sources on the land, and if there's no water whatsoever, can you sink wells?

9. Do You Have a Revenue Forecast?

The amount of income you expect your business to bring in within a given duration is known as revenue forecast. When you are buying land as a beginner, you're likely making an investment from which you aim to recoup. Whether the land is for personal consumption or commercial development, you must have plans for revenue expected in the first quarter of the year.

Revenue forecast helps in comparing the cost of land with the cash-generating operation you'll set up. If there's no match, you can switch investment ideas or find another parcel that's more in line with your affordability.

Start Small: Don't overwhelm yourself with everything when buying land and keep in mind it is a process to understand the nuances of how to do it. When looking at affordability and profit, be conservative with estimates!

10.Consider Your Intentions for Purchasing Land

It might appear repetitive but have you thought through about buying land?  Why is it that you've decided to own acreage, and what are the aesthetic appeals driving your investment? Your land purchase should make sense for your business and family as it could involve lifestyle changes. If, for instance, you're buying farmland, there will be lots of money and work involved before it can become profitable, and such a decision mustn't get taken lightly.

The Verdict –

A competent realtor will assist in comparing various properties based on your specific requirements for investing in land purchase. Local agents know the history of the land and have a conducive rapport with town clerks or council authorities.

You'll feel confident with your lot purchase while gaining the trust of local tradespeople with the help of a knowing and unbiased professional.

Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $200,000 in student loans with his wife in less than four years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, helping others with their debt and recommend using Personal Capital to track your finances.