So you’re looking into buying some undeveloped land property. There are some things you should be familiar with before you start searching for that perfect plot, and even before you start dreaming up what you’ll do with the land once you have it! In this blog, we’ll cover the pros and cons of purchasing undeveloped property. Let’s get started!
What Is Undeveloped Land and Why Do People Buy It?
In simple terms, undeveloped land is a property with no buildings, no roads or driveways, and no public utilities. Sometimes it is called “raw land” because it’s pretty much untouched. As more and more properties are bought up and built on, the supply of raw land goes down. With low supply and high demand, buying undeveloped land is often looked at as a valuable investment and a good way to diversify any portfolio. You can turn undeveloped properties into all kinds of things, like:
- Recreational or hunting land
- Parking lots
- Rental plots for farmers
- Rental plots for people who live in RVs or Campers
- Storage
- Farming land for produce, crops, livestock, flowers, or even Christmas trees
Or, you can leave it untouched and hold on to it until the market rises. Then you could sell it for a profit! People like to purchase raw land because it’s so customizable – you can truly build whatever you like (as long as what you like is in compliance with local rules and regulations). If you’re not looking to build but want to invest in real estate as an asset, undeveloped land usually has lower maintenance costs since there are no buildings to keep up with. Further, there’s often less competition involved in buying raw land than there is in purchasing properties with homes or buildings on them! Not to mention that the return on investment when you do decide to sell is often really nice.
The Downsides of Buying Undeveloped Land
Every rose has it’s thorn, as they say. Undeveloped land is no different! There are some downsides to purchasing raw land over a property that already has a home or structure built on it.
- Undeveloped land mortgages often require much larger down payments. Because raw land is usually seen as a “riskier” investment by lenders, they generally require up to 50% down (vs. the 15-25% required for developed land).
- Battling zoning restrictions on raw land can be a headache. Zoning laws can change property to property, and they can restrict the types of things you can do on the land. Before you purchase a plot, do your homework to find out what is and isn’t allowed to be built and done to the property. To find this information, you can call the local government offices that handle properties, or you can even try the library or government websites.
- Time can be a downside to buying raw land, because it can take a lot of it to build what you need. If you’re looking to build something specific (like a home) on a piece of undeveloped land, you should nail down your timeline before purchasing. Doing your research on zoning, utilities, and other barriers to building can help shorten your timeline, but always plan for a few hiccups along the way.
- Sometimes, raw land can come with limited or unique access rules. Easements are legal agreements that allow a party to access or use a property for specific purposes. For example, if a piece of land is landlocked, the only way to access it may be through someone else’s land. If an easement is not in place or is too restrictive, you may run into issues with getting onto your property. Make sure any easements are agreeable and accessible to your needs!
- The last con we’ll discuss are the permit fees. Raw land can come with all sorts of unexpected costs, permits being up there on the list. Depending on the property, you may find yourself needing to obtain several utility permits, which can cost you anywhere from a few hundred bucks to a couple thousand dollars! Before you purchase land, look into the types of permits you’ll need to assess whether or not the land is truly in your budget.
Steps to Buying Undeveloped Land
Still interested in investing in undeveloped land? Edge Realty is Central Arkansas’ favorite real estate team, and we can help you locate the perfect property for your needs. We’ll help you every step of the way, assist you in gathering information on the properties you’re interested in, and make the process of purchasing as painless as possible! Get in touch with us to hear about our current raw land listings! You can reach out here. We’re looking forward to meeting you!