Unveiling The Secrets To Scouting Land For Savvy Investors

Investing in land is a great way to diversify your portfolio and make good profits. It is a crucial real estate investment with better returns at lower risks. However, buying raw land can be a risky investment as it may not generate income and may not result in a capital gain when sold.

When buying land, it is important to know what you are buying. It is crucial to do your legwork and be aware of the historical trends, location, flexibility, and potential issues with the land.

- Know what you are buying: Understand the historical trends, location, and potential issues with the land.

- Stick to primary markets: Location is crucial, and it is better to stick to primary markets with strong density and demographics, ensuring consistent demand for the land.

- Flexibility: Consider the specialised use of the land and the potential impact on your investment if the market or customer changes.

- Do your legwork: Understand the past of the plot of land, get the necessary reports and surveys, and ensure that what you are buying is 100% yours.

- Order a title report: Verify that the owner of the land is the actual owner and check for any liens that may prevent your project from starting.

- Access to utilities: Ensure access to basic utilities such as electricity, water, and sewer connections.

- Zoning restrictions: Be aware of any zoning restrictions that may impact your intended use of the land.

- Environmental conditions: Conduct the necessary environmental tests to ensure the land is suitable for building.

- Survey the land: Identify the boundaries of the property and check for any encroachments by neighbours.

Check zoning and future development plans

Zoning and future development plans are crucial considerations when buying land as an investment. Understanding the local zoning ordinances will help you avoid headaches down the road. Zoning ordinances dictate how local governments regulate land use, including building location and spacing, building form and size, and permitted uses. These regulations can impact your plans for home improvements, new construction, entrepreneurship, and outdoor storage of equipment.

Before purchasing land, it is essential to review the zoning ordinance and map for the area. Contact the local government or visit their website to access this information. If you intend to build on the land, pay close attention to the allowed uses, setbacks, building size regulations, environmental protections, and density regulations specified in the zoning ordinance.

Additionally, be mindful of future development plans for the area. Are there any plans for neighbouring land that could affect your investment, such as the construction of a chemical plant or prison? What is the outlook for population growth, employment growth, and household income growth in the region? Considering these factors will help you make an informed decision about the potential return on your investment.

Furthermore, be aware of the time and challenges involved in rezoning property. Rezoning can take one to five years, delaying your return on investment. There is also a chance that your rezoning request could be denied, so it is advisable to find land that aligns with your vision within the existing zoning restrictions.

Research utilities and road access

When buying land as an investment, it is important to research utilities and road access. This can be done through a combination of online searches, phone calls, and site visits. Here are some key considerations:

Utilities

• Water and Sewerage: Check if public water or sewerage services are available for the land. If not, you may need to drill a well or install a septic system, which requires permits and can be costly.
• Electricity: Determine if the land has access to an electricity supply. If not, you may need to pay to have power lines connected to your property.
• Internet, Television, and Phone: Ensure access to these utilities, especially if you plan on using the land for business purposes.
• Alternative Options: Consider alternative energy sources such as solar, natural gas, propane, heating oil, or geothermal power.

Road Access

• Public Road Access: Ideally, the land should have direct access to a public road. This guarantees access to the property at all times and may also provide access to city water or sewerage services.
• Private Road Access: If the land is only accessible via a private road, you may need to establish an easement with the neighbouring landowner. This can usually be done through friendly discussion, but it is recommended to consult a real estate lawyer to draw up official documentation and protect yourself from liability.
• Un-deeded Access: If the land is un-deeded, you may need to cross over a road or trail owned by another landowner to access your property. This can be a complicated matter and may deter lenders from providing capital for your investment.

In summary, researching utilities and road access is crucial when buying land as an investment. It can impact your plans, costs, and the overall feasibility of your project. By conducting thorough research and seeking expert advice, you can make informed decisions and avoid unexpected complications.

Conduct environmental tests

When purchasing land as an investment, it is important to conduct environmental tests to identify any potential issues or contamination. This is a crucial step as you will become legally responsible for any necessary environmental cleanups, and it can also impact your ability to build on the land.

An Environmental Site Assessment (ESA) is a common process that acts as an insurance policy for prospective buyers. It evaluates the likelihood of contamination from substances like lead, oil, radon, mercury, asbestos, and other toxic chemicals. ESAs can also assess the future potential for environmental contamination, helping you make an informed decision about the land's suitability for your investment goals.

There are two main types of ESAs:

• Phase I ESA: This is the necessary standard for evaluating pollution or contamination that could present a major liability. It includes a job site visit, environmental compliance inspection, historical property information, regulatory agency file reviews, database reports, and more.
• Phase II ESA: This is a more in-depth investigation that focuses on pollution and contamination in groundwater, soil, and other aspects of the property. It involves taking and analyzing samples to determine the extent of contamination and any needed remedial steps.

By conducting these environmental tests, you can identify and address any environmental concerns before completing the land purchase. This ensures that you don't inherit a costly and time-consuming cleanup project, and it can also provide leverage to require the seller to resolve any issues or adjust the purchase price.

Remember, purchasing land without knowing its environmental status is risky. The upfront expense of an ESA is a worthwhile investment to protect yourself from potential liabilities and ensure you are making a well-informed decision about your land investment.

Survey the land

Surveying the land is an essential step in the process of buying land as an investment. It is a way to be an informed buyer and avoid any hidden surprises or issues that could cause problems down the line. Here are some key reasons why surveying the land is crucial:

• Property boundaries and accuracy: A land survey will show the exact boundaries of the property and ensure that you are getting all the portions of the land you expect, including the accurate number of acres. This is important for complying with regulations related to land use, such as installing a septic system, drilling a well, or qualifying as "farmland", which often require a minimum number of acres. Clear property boundaries also help avoid disputes with adjoining owners over issues like tree ownership or the ability to build a road.
• Easements and encroachments: A survey will reveal any easements or encroachments on the property. An easement is when the landowner grants another party permission to use a portion of their land, such as allowing a neighbour to take a shortcut through the property. An encroachment occurs when an improvement belonging to one property owner partially lies on an adjacent property without permission, such as a neighbour's fence or perimeter that extends onto your land. Knowing about these issues is crucial for understanding whether they will affect your use and enjoyment of the property.
• Topography and elevation: Depending on the project you're planning, you may need a topographical survey to understand the elevation of the land and any erosion control issues. This type of survey is often required for road and bridge construction, new construction projects, and landscaping projects.
• Subdivision potential: If you intend to divide the land into smaller parcels, you will need a subdivision survey. This type of survey involves documenting the location, mapping out property lines, and measuring distances for each subdivided lot.
• Zoning and building restrictions: A land survey can help identify any zoning restrictions or building codes that may impact your plans for the property. For example, ordering a land survey prior to purchasing a residential lot can confirm whether the lot is buildable, as some vacant lots may have issues with property standards or easements that prevent development.
• Utility access: A survey can also reveal the location of utility hookups like sewer connections. If there is no sewer connection, you will need to consider a septic tank and conduct a percolation test to ensure it can be installed.
• Flood risk: Understanding whether the property is located in a flood zone is crucial for assessing risk and potential insurance costs.

It is important to note that different types of land surveys provide varying levels of detail and focus on specific land concerns. The most comprehensive and commonly recommended survey for vacant land is the ALTA/ACSM (ALTA) survey, which stands for American Land Title Association/American Congress on Surveying and Mapping. This survey type includes the legal boundaries of the property, any improvements, easements, rights-of-way, and encroachments.

Remember that surveying the land is not just a box-ticking exercise but a vital tool for making an informed investment decision and avoiding costly surprises down the road.

Assess the local housing market

When buying land as an investment, it is crucial to assess the local housing market to make an informed decision. Here are some detailed guidelines to help you through this process:

Firstly, examine the historical data of the target market and neighbourhood. Review online real estate market performance reports from sources like Zillow or the National Association of Realtors (NAR) to understand what has been selling and for how much. Look at long-range historical trends in population growth, employment growth, household income growth, personal income growth, and gross county product to grasp the demand for land versus the supply. This will help you identify potential areas with strong growth potential.

Secondly, dig deeper into the specific area you are considering. Study data on population and job growth, major employers, workforce education levels, and quality of life rankings. These factors will give you an idea of the future demand for real estate in the area. Additionally, look at local housing market activity, including past, current, and future market trends for rental properties. Understand the types of properties in the highest demand and identify the most active agents and investors in the area.

Thirdly, use multiple sources to gather unbiased data. Online investment portals, local news, community websites, social media, and bloggers can provide valuable insights. By using various sources, you can filter out any built-in bias that people within the market may have. This will give you a more comprehensive understanding of the local housing market.

Lastly, understand how market factors can affect your investment strategy. Consider your investment goals and choose a market that aligns with them. For example, if you are focused on cash flow, look for areas with strong rental demand. On the other hand, if you are seeking rapidly rising home prices, invest in markets with high appreciation potential. Remember to always do your due diligence and consult with professionals whenever possible to make an informed decision.

Frequently asked questions