The strategy you choose will ultimately guide your search for the perfect piece of raw land. The reason for this is that each investment type will require slightly different characteristics. For example, the optimal buy and hold plot will likely be very different than one intended for billboard rentals. Buy and hold plots tend to appreciate faster in up and coming markets, while land for advertising can be in smaller markets. Location is not the only thing to consider when evaluating a raw land investment. There are a number of other factors that should come into play before you agree to sign on the dotted line. Review the following questions next time you consider a potential raw land investment:
Where is the plot located?
While location is not the only thing investors should evaluate, it is the most important. The location of a raw land investment determines the viability of the deal. The plot could be spacious and affordable, but if it’s truly off the grid it may not make the most sense as an investment. Determine your strategy, and narrow down different market areas with options to choose from. For example, if you are hoping to complete a new construction project research expanding neighborhoods in your market area. Once you have an area in mind, then begin searching for the right piece of land.
How is the property zoned?
A property zone essentially designates what you can use it for, like commercial or residential space. You can rezone land; however, this process can greatly impact the timeline of a given investment deal. According to Legal Match, the rezoning process can take around 180 days to be completed. Depending on your exit strategy this can increase holding costs and significantly delay potential profits. Always make yourself aware of a property’s zone before investing to avoid the shock of any new regulations.
Are any utilities available?
When most people think of raw land, the first thing that comes to mind is typically a plot of land out in the middle of nowhere. Although this is not always the case, some land can be located in rural or completely undeveloped areas. That’s why it is crucial to learn what type of resources are available at the property before closing. Are there water lines or electricity? What about internet? These factors can influence not only the overall cost of the deal but also the potential timeline of the project—as you may find yourself waiting for utility companies.
What is the history of the land?
Similar to the purchase of a residential or commercial property, it is always necessary to complete a title search. Look at the title history of the land and determine whether there are any ownership disputes. Pay special attention to how long the current owner has had the property. If they are trying to sell quickly after owning it, it could signal there is an issue with the property.
Are there any other issues with the area?
Before making an offer on a raw land investment, it is a great idea to hire a land surveyor to check out the property. A land survey will confirm the boundaries of the plot and identify any potential restrictions. For example, the land may be in a designated flood zone. Depending on your plans for the land this could greatly affect the potential profitability of the deal. Take precautions when purchasing raw land by doing your homework and hiring a professional land surveyor.