June 5

Buying Raw Land: What You Need to Know

Buying raw land is a significant investment with a potential for substantial returns, whether you choose to develop a residential, commercial, or agricultural property.

However, since buying raw land entails more risk, financing can be complex, which is why you should fully understand the reality of owning undeveloped land before pursuing the purchase.

There’s more to buying raw land than just searching for the right property that will serve your intended purpose. You will also need to consider the additional costs and permits required for building a property. Ensure you find out about access to roads and utilities, local zoning laws and restrictions, and easements before making your purchase.

As demand for raw land continues to grow and the supply continues to decrease, more people find it challenging to finance land of their own. Before investing in undeveloped land, weigh the pros and cons and consider the associated costs of taking this big leap.

Understanding Raw Land

What is Raw Land?

Raw land is often called undeveloped land, a vacant lot clear of any buildings, public utilities, and driveways.

Undeveloped land is often used for:

  • Investment
  • Warehouses, farms, or agricultural lots
  • Recreational use
  • Parking lots
  • Storage spaces
  • Space for rent to farmers or vehicle dwellers (tiny houses or RVs)

Is It Smart to Buy Raw Land?

It is smart to buy raw land. Here are a few reasons why undeveloped land is a great investment:

Lower Costs and Fees

Of course, there’s nothing wrong with purchasing a completed residential or commercial property. However, buying undeveloped land and building your dream property from scratch is generally more cost-efficient than buying a pre-existing property.

This is because carrying costs and maintenance costs are kept to a minimum. Generally, maintenance and repairs can bump up home prices by 1-3%. Undeveloped land also has lower property taxes.

Flexibility

Have you always wanted to build your dream home? Raw land makes it easier to build property because you have a blank slate to work with.

As long as you follow local zoning laws, there is no limit to how you want to customize your home from the ground up. On the other hand, if you were to buy land with pre-existing structures, it would make it harder to execute your plan. You will have many physical barriers to work around on the property.

Less Buyer Competition

Competition for raw land isn’t as hot as real estate with an existing building on it. This is because not many homeowners are interested in planning an entire house from scratch. Some simply don’t have the luxury of waiting too long to move in, either.

To avoid housing competition, it would be a great choice to take advantage of the situation and buy raw land.

Solid Investment

Even if you don’t build anything on it, Raw land will likely increase in value over time. Remember that land is a finite resource, so as the population grows and space becomes more limited, you’ll eventually see huge returns on your investment.

Benefits of Buying Raw Land

Top Things to Know When Buying Raw Land

You need to know several key contemplations and risks before investing in raw land.

Location

When buying undeveloped land, the sole criteria you can’t change is the lot’s location. Ensure that the land you invest in ticks all the boxes for your dream property. 

Especially if you’re planning to develop the property since it must match the criteria of a valuable investment property with increasing demand and competitive resale value, in this way, you’ll be able to get a fulfilling return on your investment.

Location doesn’t just consider where the home will be, but whether or not you’ll be able to use the land as intended. This will include getting permission to build on a property and understanding local laws and your financial obligations.

Cost and Expenses

When buying undeveloped land that you plan to build on, consider all the other costs of building a house from the ground up. Remember that these expenses can add up fast, so you should have accounted for every expense before purchasing the land.

For one, you’ll need to have the land surveyed to ensure the boundaries of your land. Another significant expense is introducing access to utilities, including running water, electricity, gas, and even a sewage system.

What Should I Pay for Raw Land?

According to Home Advisor, it costs approximately $320,000 to $450,000 to build a house in North Carolina. The cost of building will, of course, depend on the location, the size of the house, the layout, and the materials used.

To give you an idea, though, here are a few of the expenses you’ll incur to develop the land:

  • Environmental testing
  • Clearing and grading the land
  • Road access
  • Building access to utilities (water, sewage, natural gas)
  • Builder charges
  • Additional permits (Permit to build, electricity, plumbing)

Loan Challenges

Financing raw land is more complex than finding a loan for a finished property. A down payment for developed land is somewhere between 15% to 20%, but it can rise to as much as 50% for raw land.

Lenders are likely more wary of these situations since it’s likely that many borrowers do not have a solid plan about the land or the build just yet. 

Because of the ambiguous nature of your investment, expect to make higher loan payments as well.

Zoning Restrictions

Don’t think you have 100% free rein when you buy raw land. Remember that zoning restrictions dictate what can and cannot be done to your property.

Each area has varying zoning laws, do your research – or approach your local government office.

Experienced Real Estate Agent

Road Access

While not particularly a problem for raw land located in urban areas, buying raw land in rural areas most likely means having to set aside money to build road access.

Lack of road access is an issue because it affects the pace at which the area will develop. Moreover, investors will not be interested in a patch of land with no legal access road.

Easements

Easements grant a person or a group of people the right to access the property for a specific purpose. Ensure that the property you buy doesn’t have easements that will ruin your plans for the property.

You’ll also have to check if the undeveloped land is landlocked. This means that it’s surrounded by property already owned, so there is no access to the main road or any utilities.

You will need to express an easement to a neighboring homeowner for landlocked property to gain access.


Conclusion

It’s especially true that if you’re dealing with a huge investment like buying undeveloped land, you’ll need the help of an experienced real estate agent to guide you throughout the whole process.

Call me, Nancy Braun, at 704-997-3794, and I’ll be happy to help you find the perfect undeveloped land that suits your needs.


Tags

Charlotte Real Estate, Nancy Braun, showcase realty


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