10 Warning Signs To Look For When Buying Vacant Land

Dated: 02/12/2016

Views: 142

Vacant Land is one of the most overlooked and misunderstood real estate investments in the world. Most real estate investors completely fail to recognize the superior benefits that come with owning land in its raw form. It’s unfortunate, because the simplicity and stability that comes with owning the right piece of land (purchased at the right price) can  far outweigh the myriad of problems that are certain to come up with any other type of real estate.

1. What is the Zoning on the Property?

First and foremost, it is vitally important to understand what a property can be used for, and what the highest and best use of the property is. With a simple phone call to your local planning  & zoning department, most offices can give you the answer to this question in a matter of seconds. Once you know the zoning classification (e.g. – residential, mixed-use, commercial, industrial, agricultural, etc.), ask them to give you some examples of what type of property would be allowed under each of these particular zoning classifications. They may even give you some ideas that you hadn’t previously thought of. Once you understand the most ideal use of the property – you can quickly determine whether it will fit your needs (or the needs of those you intend to market the property to).

2. What is the Topography of the Property?

Especially when I’m buying vacant land out-of-state, my first line of business is to understand the topography of the property. There are many, many places around the world that have very unpredictable elevations, cliffs, mountains, valleys, ravines and more. In many cases, the topography of the land can have a huge impact on the build-ability of a property. For the same reasons you can’t build a house on 90 degree cliff, you should be doing some preliminary research to find out where your property is located, and what the lay of the land is. One of the best ways to do this is by using Google Earth (which is free). You can download the software, search for your property (using the address or coordinates) and zoom in using your mouse buttons and the control and shift keys on your keyboard. This will also allow you to tilt the earth on its side so you can see precisely where all the hills and valleys are in your area. This software has given me a crucial perspective on hundreds of occasions.

4. What Public Utilities are Available? (Water, Sewer, Electric, Gas, Phone)

If a property doesn’t have access to one or more of these staples of reasonable living, the property (for all intents and purposes) may not be considered build-able. After all, who would want to build a house where they can’t flush the toilet or get access to clean water? If a property isn’t build-able, you will lose a massive portion of the property’s usability, marketability and value. Since most people buy land with the intent building on it, you will definitely want to be aware of anything that could become an obstacle to that objective.

5. What are the Required Building Setbacks on the Property?

First, you need to understand the exact dimensions of the parcel of land you are evaluating. Next, call the local zoning department and ask them what the designated building setbacks are for the property in question (building setback requirements are very common, and are imposed as a way of giving order and consistency to the buildings in any given area). When you take these setbacks and regulations into account (relative to the size of this parcel of land), is there still enough room to build something worthwhile – or does it render the property useless? I’ve come across several properties that were designed (albeit, unintentionally) to be too small and after factoring in the setbacks – you can’t build anything on them at all, leaving them virtually worthless!

6. Does the Property Have Any Usage Restrictions?

Most of the vacant land parcels I come into contact with have SOME kind of usage restrictions. Most cities and townships impose very reasonable restrictions, and most home owner’s associations will intentionally put even more stringent restrictions in place to help maintain an element of formality and “predictability” in the neighborhood. The idea is to keep out any bizarre behavior (cars in the front lawn, yards that nobody takes care of, etc.) or building plans. This ultimately helps to maintain the mutual value of all buildings in the subdivision. Restrictions usually make sense on some level – but they may not make sense for what YOU intend to do with the property. Make sure you understand what the rules are, so you don’t end up in a fight with the property owners association or having to pay fines because you can’t live with these rules.

7. Is the Property Located in a Flood Zone?

In some parts of the country, parcels of land are vacant because they are literally under water. In other areas, there are many properties located within close proximity to bodies of water that is prone to flooding. In either case, if a property is at risk of flooding – you’ll want to know about this before you buy, because properties in a flood zone can be extremely expensive to insure. Land that is located near a state of federal body of water can be extremely valuable, but this close proximity to the water can also create a flurry of issues…  so be sure you understand the ramifications of your particular location.

8. Does the Soil Percolate (aka – “Perk”) or have Access to a Sewer?

If you’re planning to build a “dwelling” of any kind on your parcel of land, there is one issue that may seem insignificant at first glance, but it has the potential to make or break a land deal. It’s called a “Perc Test” – and if you’re dropping some serious coin on land in a rural area, this is an issue you’ll want to be sure about before you sink your money into it. A Perc Test (also known as “Perk Test”, and more formally known as a “Percolation Test“), is a soil evaluation that tests the rate at which water drains through soil. If a property doesn’t have easy access to the local sewer system, a perc test is required to determine whether a septic system (the alternative to a sewer) can be installed on the property. If a property doesn’t pass this test, you could have a very difficult time building any type of dwelling on the property, so unless you’re able to tap into the municipal sewer system (which will negate this issue altogether), be sure to give the county health department a call and ask them what is required to install a septic system (or connect to the local sewer) in your area. 

9. Is the Property Landlocked? If so, are there any Easements or Access Roads to the Property?

It’s an odd phenomenon, but believe it or not – there are thousands of properties all over the country that have no road access. They are surrounded on all sides by other private property – which (according to some) deems the land virtually useless. In a sense, these properties might as well be on the moon – because nobody can legally access the property.

This issue can be overcome if you can establish a legal, recorded easement to the property. This can be done if one of the neighbors is willing to allow you access through their property – to yours. In many cases, a neighbor shouldn’t be expected to do this for free, you’ll have to give them a reason to help you (usually in the form of money). Again, this isn’t an impossible issue to overcome, but it is definitely something you’ll want to be aware of before you purchase.

10. What is the Size and Shape of the Property?

I’ve seen a number of properties that are virtually useless due to their size and shape. I remember on one occasion, I came across a parcel of land that was 5 feet wide and 900 feet long. I’ve also seen properties that were 10 feet by 10 feet. If you see a parcel of land with an odd shape, use your common sense. If you can’t think of a legitimate use for a property with its given dimensions – you’ll probably want to think twice before buying it.

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Wendie Neely

Wendie Neely is licensed in both Kentucky and Ohio. Her background includes several years as a Real Estate Appraiser placing her in a unique position to help Buyers and Sellers understand property val....

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