While I personally can’t put together so much as an IKEA table without the help of a YouTube tutorial, others among us are bold enough to build a home from the ground up. No matter where you plan to live—although particularly if you’re seeking space in a suburban or rural area—purchasing land on which to build a house is a perfectly viable option and allows you to customize your home in ways you simply couldn’t if you were looking at an existing build.
Still, there’s a lot to consider before you buy land, and you’ll want to pair with an experienced real estate professional to help guide you. Here are seven questions to ask when buying land to build a house.
1. Can you actually build on it?
Not all land is fair game to build on. In fact, far from it. Spare yourself the immense headache of buying a nonresidential lot by doing your homework up front. You may luck out with a zoning search tool online (provided by your city or county) that you can use, or you may have to call your local city or county zoning division.
If the lot you’re interested in is cleared for residential use, don’t stop there! You’ll want to anticipate any long-term land-use plans from the city—think new roads or highways that could cut right through your new property. Last, understand what ordinances apply to the property. Roads are the most extreme example, but other types of ordinances could relate to parks, law enforcement, and even animal control. Understanding the bounds of a property’s potential upfront is crucial.
2. Can you even access it?
This is an extreme example, but it’s happened before: Imagine if you bought a piece of land only to find out later it’s only accessible by private road? Such a situation is much more likely in rural areas; I personally know a family who purchased a property in off-the-grid Montana only to find out they couldn’t technically legally drive on the roads to get to it, and there was no other method of entry due to physical barriers like mountains and rivers.
If a property can’t be accessed by public roads, you’ll have to get an easement, which usually carries an extra cost. An easement would allow you to use private property for a specific purpose to access your own property. The upside? Easements are more common than you think. Utility companies frequently use easements so that they can access sewer pipes, cables, and utility poles that would otherwise be off-limits because they’re on private property. Remember: Easements will usually dictate the use—for example, you can get to your house under the easement, but you can’t build any structures along the way.
3. Are there any HOAs or deed restrictions?
We’ve shared the rural example of private roads, but now let’s shift to a more suburban or urban example: HOAs. If you’re considering purchasing an empty lot in an existing neighborhood or subdivision, you may need to check to see if there’s a homeowner’s association and, if so, what the HOA rules would be. In addition to potential membership fees (which can add up!), HOAs have the ability to dictate the type and style of build, the ability to add external features like a pool, and even the exterior color of your home.
Even if the neighborhood doesn’t have an official HOA, you’ll still want to check in on any deed restrictions. These are meant to provide a more neighborly experience and commonly include provisions like not building in a manner that obstructs a neighbor’s view. Rules surrounding fences, trees, and adjacent structures like a casita are also likely to come up in a subdivision. While these can be frustrating and limit what you may have had in mind for your home, remember they are also meant to help: You’ll never deal with a neighbor who cut down all the trees and painted their house neon orange.
Read more: HOAs: What You Need to Know
4. Is it on a floodplain?
Flood risks are knowable and avoidable whether you’re buying an existing home or an empty lot. Before you purchase land, make sure to investigate whether it’s on a flood plain. Not only can flood insurance in a high-risk area cost thousands of dollars annually, but a home built on a flood plain is a harder sell when the time comes to put it on the market. You can determine if a home is in a flood zone at the local level, but the Federal Emergency Management Agency also has an online flood map tool.
Read more: Do you need flood insurance?
5. Will the surrounding area remain the same?
If your favorite thing about a piece of property is that it’s isolated and private, you’ll probably want to look into future use. We mentioned this above in regards to long-term projects like roads, but you can think more short-term too. Is it in a subdivision with an empty lot next door in a booming community? Chances are, that lot won’t be empty for long. One caveat here is land that backs up to a park or nature preserve—check with your local government first, but you can reasonably expect things to remain the same.
Read more: What is external obsolescence?
6. Is it ready to build on?
Let’s say you’ve found a lot and it’s cleared all the hurdles above. You’re ready to go! But is the land itself? Turns out, lots come in three variations: build-ready, unimproved, and raw.
Build-ready is exactly what it sounds like. The land itself has been prepared and is up and running in terms of things like utility access (you’ll still need to obtain all permits, of course). Unimproved lots don’t have utilities set up, while raw lots are meant for speculative purposes and could take a while to be ready for any sort of building. We’ll talk about loans in a moment, but it’s worth noting here that build-ready lots are the easiest to get a loan for—they’re less of a risk for banks.
7. Can you obtain a loan?
Put simply, land loans are different than home loans, they’re usually trickier to get compared with a traditional mortgage. That’s because land loans usually require a much higher down payment, ranging from 15 to 25 percent—and that’s for a build-ready lot (see above). For a raw lot? You could be looking at a down payment that’s as much as 50 percent! Moreover, many land loans must be paid off in full within three to five years, a much different timetable than your average 30-year mortgage.
The Land Buyer’s Checklist
The questions above are just a sampling of the types of things to consider before you purchase land. Fortunately, the Realtors Land Institute has a comprehensive checklist for land buyers that we have included below. In addition, RLI also has a search tool where you can look for land for sale.
Here are several extra items the RLI suggests you consider—many of them being more applicable to rural properties—in addition to everything we’ve discussed above:
- Special tax assessments
- Property boundaries
- Crop and timber yields
- Well water quality and flow
- Fire and ambulance services
- High-speed internet options
- Adjacent properties’ land use
- Past logging practices
- Water rights and soil productivity
- Topography and geological hazards
- Hardship and farm help dwellings