Land investing can be profitable and fun, but it also requires research to make sure you don’t get burned. We list out the top 5 mistakes new land investors make and how to avoid them.
1. Land investing without doing title research
Someone sent you a signed and notarized deed so you now own the property, right? You may, but you may not if they didn’t own it in the first place or there are issues with the chain of title, known in the industry as title ‘clouds’.
Adding to the complexity, land often has multiple owners given it is typically a high value asset. How do you know the person selling the property to you owns it to begin with, or is the only owner? What if they are an heir to an estate, do they have the legal authority to sell it? What about the other heirs? Do they have to approve it?
These questions and issues have come up again and again in real estate and it has led to the creation of an entire multi-billion dollar industry just to manage these issues – the title insurance industry. Title companies are in the business of making sure the seller actually owns the property fully and can legally convey the property to the buyer. They then issue insurance to the buyer if anything else happens to go wrong with the title, but they do a ton of work up front to correct any issue to make sure the probability of having to pay out the buyer remains very low.
So what should you do as a land investor? First step is to check with the county recorder to see if the seller’s name or entity actually owns the property or ask them to send you the deed. The county recorder publicly files deeds and other ownership instruments so that others can see who has claims on a given property. Once you check that box, if the property is of significant value, close the transaction through a title company. We wrote an entire article on title insurance so you can refer to that if you would like more detail.
2. Not checking the zoning
You now own the land, so you can do whatever you want with your property can’t you? It isn’t that simple, unfortunately. Most counties have permitted uses and restrictions based on what they call zoning classifications.
The reason they have these rules is to organize for city planning purposes and to minimize any negative implications from one type of property / industry on their neighbors. For example, you wouldn’t want a trash burning facility to move in next to your home in a residential subdivision, would you? That, in a nutshell, is the rationale behind zoning laws.
This obviously is important based on what your plans are for the property. So what do you do? Start with asking the seller if they know what the zoning classification is and what the permitted uses and restrictions are. Typically, the county will put together a document that summarizes all of the items you can do without a permit, with a permit and what you can’t do. Want to put a manufactured home on the property, have a few horses and grow some crops? You probably can if the land is in a rural area, but be sure to check the zoning.
After you check out the material provided by the county, it is always a good idea to call the county planning & zoning department and ask if your use case is allowed. Don’t buy a property just to learn after the fact that you can’t do what you want with it.
3. Not checking access to the land
Can you get to the property, and what kind of access do you prefer? If the land is for recreational purposes, perhaps you are fine with needing an off-road vehicle to access the property or maybe you want easy drive up access because you plan on building a home or cabin.
You don’t want to be in a situation where it is more difficult to access a property than you anticipated, so some research online using Google Earth or Maps and / or a site visit will let you know if the type of access is for you. You can also take advantage of county plat maps or online mapping tools to dig into access further.
4. Not researching what is required to build
If your plan is to build a dwelling on the property, make sure you spend enough time up front researching what is required. The rules, permits, timelines across states and counties can vary significantly so don’t assume that one jurisdiction is the same as another. You’ll likely need specific types of surveys, understand building setbacks, need to pay for permits and understand if there are time limits on how long you have to complete construction.
You’ll also need to plan and budget for utilities. Do you have access to public utilities like power, water and sewer lines or will you need private utilities such as solar power, septic systems or potable water delivery / a well. All of these items typically requires permits, inspections and third parties to install them so get some quotes and spend some time with the vendors to know what you are getting into.
5. Not investing in the perfect parcel of land
Given every single property is unique, what we see time and again is buyers who have done all the research on a property, have gone out to visit it and then for whatever reason they hesitate to purchase the property and someone else has bought it instead. Unfortunately, it is likely that if they think it is a great property others will too. Assuming the property is priced well, you have done your research and it is something you can afford, waiting too long can backfire as speed is a variable in any real estate transaction.
Also, don’t assume that just because you don’t have all of the money for the land up front that you can’t do a deal. Many sellers are open to providing owner financing and you can work with them to find a creative win-win solution. We help buyers all the time lock down the property they want with owner financing packages. The last thing we want is to let the perfect property slip through the fingers of a buyer just because they don’t have the entire amount today.
We make land investing easy
We make land investing easy as we have a variety of properties for all types of investors. We also offer owner financing packages on most of them. Also, feel free to contact us with any questions you may have. We are here to help make the purchase process quick and easy and make you the proud new owner of that perfect parcel of land.