With all the competition for single family homes and the lack of available inventory, some real estate investors are moving to land as their next investing frontier. Meanwhile, some homeowners are looking to get away from the crammed subdivisions and buy some acreage in the country. Whether for investing purposes or for personal reasons, if you are considering buying land, you’ll need to be equipped with the wisdom shared in this training to ensure you don’t make a big mistake. While buying land may seem simple, in reality, there is a tremendous amount of details that you must consider that a single family home buyer never needs to even think about. This training will give you a crash course on land buying and provide you with tips that you will probably hear no where else.
There are a lot of people buying land as opposed to putting money into the stock market or into buying bonds. I have often heard the comment that land is simpler than buying a house. They tend to picture the problems with flipping houses. For example having to get an inspection and discovering plumbing or electrical problems, termite damage, or foundation issues.
This is true; however, land has its own set of issues. Usually by the time you’re flipping a house, the developer of that home already overcame all the land issues and details. So, when purchasing land, you now must deal with those challenges. Here are 10 tips for buying land to help you make good decisions and negotiate better deals while navigating those challenges.
1. Inspect the Terrain
You can look at Google maps and the satellite images, and even make use of their terrain filter as well. However, I can tell you from experience that it’s not until you look at the land yourself that you can see what the terrain really is. You need to see the land before you buy it even if you are investing from a long distance.
For example, I own a property in the Smoky Mountains. As I was negotiating the deal, I saw it had 2.8 acres and I thought to myself, that’s kind of a nice little bonus. Now, I was negotiating based on just the log cabin itself, but I thought an extra 2.8 acres doesn’t hurt. The satellite view on Google maps made it look like there was woods behind the log cabin. It wasn’t until I went there to look at the property that I saw it was 2.8 acres of sheer cliff, which is basically useless.
2. Is the Land Cleared or Treed?
This you can see on Google maps usually, however it may be an older satellite picture, so you still want to see it in person. You can check this while you’re looking at the terrain. When you are negotiating you need a clear understanding that the other comps you’re comparing it to is cleared or treed land. This is because clearing treed land is not as easy as it used to be due to increased regulations. In Florida, you must get a permit to cut down a tree that is more than 12 inches in diameter. Often you are required to plant new trees to compensate for the trees you just cut down. If the trees get too big, you then need to go through an approval process.
Recently they cut down 150-year-old oak tree in my town and that was a big deal. It was on the front page of the newspaper and a lot of the citizens were just irate and angry. Be very careful when you’re negotiating these deals and make sure that you understand the difference between cleared versus treed.
3. Know If the Land has Wetlands on It
What are wetlands? The Department of Environmental Protection defines wetlands based on the type of water-loving vegetation growing in the hydric soil of the land and are protected. Thankfully there is a tool called the Wetlands Inventory Mapper where you can search to see where the government thinks there’s wetlands on the land. The link is provided at the top of the page. This is so significant for several reasons.
- It makes the land a lot less valuable because now for you to do anything, you’re going to have to make major amends with the government. For example, if you need to put a driveway across what they consider a wetlands area. (A wetland doesn’t necessarily have standing water, it could be the type of vegetation growing on that part of your property.)
- You’re going to have to pay what’s called wetlands mitigation credits, and they usually sell them by the 10th of the acre. The value of those right now in the marketplace here in Florida is about $80,000 an acre. So, for every acre of wetlands you want to develop you pay $80,000 in wetlands mitigation credits.
There are horror stories of developers trying to put together a subdivision where there is a little wetland about the size of a softball. Suddenly, they must shut down the entire development because of it. In fact, there are some developers that make a fortune by becoming a wetlands mitigation credit bank. They buy land and work out a contract with the government to improve that land. This helps with the wetlands, and then the government gives them credits in return. Then they sell the credits to private developers.
If you’re investing from afar, and you think you are getting the deal of the century, you need to look up if there are wetlands. If there are, that might be why it’s such a good deal. The vernacular in land investing is, the land is wet. So, if that land is wet, you have a problem.
4. Check if the Land is in a Flood Zone
FEMA determines what land is in a flood zone. In fact, FEMA has a map you can use to check to see if any part of the land you are looking at is in a flood zone. The link for the map is provided at the top of the page. There are some solutions to being in a flood zone. For example, you could dig a pond in the flood zone, use that fill dirt to raise the land next to it and put your house there. Whereas with wetlands you can’t modify the land at all because it’s protected.
That said, you still need to know where the flood zones are because floods are very common. Somehow people have the idea that floods are this rare catastrophic event, but they’ve always been common. All that needs to happen is a rainstorm just gets stuck. A high pressure and low-pressure system interact in a particular way and just leave that rain sitting in one little area. The next thing you know there’s a huge flood.
Another reason why you need to know where your flood zones are is because that can affect selling the property in the future. It is important to note that there have been some proposed changes to the flood insurance system or other such legislation. So, realtors contact your Congress man or woman and make sure that they’re on top of this subject of FEMA and flood insurance. This could affect people buying a house. If you’re trying to flip a property and part of it is in a flood zone and flood insurance can’t be issued after July 31st of this year, that could kill the deal right there.
5. Make Sure the Property has Access to a County Maintained Road
A lot of land deals are done in rural areas and sometimes that land does not have road access. Other times it has road access, but the road is a private road. You want to have access to a county-maintained road. This doesn’t mean it has to be a paved road, it could be a dirt road. However, it needs that county-maintained status, because oftentimes you can’t get permits for a septic. This means that the land can never have a house on it until such time as it becomes part of the county-maintained road.
Solutions for Land with No Road Access
Now, can you put some cows on there and run some cattle? Yes, there are things you can do with the land, but you may not be able to put any residential property on it, which can really reduce the value. This is very common when people are doing tax liens and tax deeds sales. Sometimes they’ll pick up land and it’s locked and surrounded by other parcels, and it has no road access. It might have a driveway, but it doesn’t have that road access.
In fact, I know an investor who makes a fortune studying the maps of his local area and picking out property. He’ll pick out a property that has long road frontage and then has some parcels back behind it that do not have that county-maintained status. He buys the property with road frontage first in one name, and then goes in with an agent’s help and purchases the other parcels behind it. Then he slices up the road frontage and can give each of the parcels access to some road frontage. That makes each one of these lots worth much more. This little angle alone can be incredibly profitable.
6. Is There Access to Utilities?
Does the property have access to both power and sewer? If it doesn’t have sewer, so long as it has county-maintained access, you can probably put in a septic. However, you still must consider access to electricity. Let me tell you, getting electricity to your home site on that land can be incredibly expensive. It’s a great benefit if the land already has an old mobile home on it or something where the electricity has already been run to. It can cost anywhere from $20, 000 to $100,000 for the power company to run a line from the road to the home site. So, access to utilities makes a huge difference and makes the land worth a whole lot more.
7. You Need Good Cell Service
Check to make sure the area has good cell service. You can do this when you’re out looking at the terrain, checking if it’s cleared or treed, trying to see where the wetlands are, checking out the flood zones, seeing if it’s county-maintained road and where the electricity is running to it. Because if you’re going to be moving out there and living in that property, you need to have good cell service.
If you don’t, it makes your life miserable. Even as an investor trying to develop or flip the land, it drives me nuts when I’m out there and my cell doesn’t work. It renders me useless. Sure, you could build a cell tower. In fact, a good friend of mine builds cell towers in Florida. A smaller one runs about $100,000, plus you need to have the power run into it. That’s a costly option.
Other people are concerned about their internet options like cable internet or DSL. I don’t get as concerned about that anymore because services like Verizon allow you to have a home MyFi that can be on an unlimited plan, so long as Verizon has some decent service. That’s what I’ve done in some of my cabins in the Smoky Mountains because I can’t get anything else besides satellite Internet. That’s awful because they only give you a certain amount of data and then they start charging you afterwards.
8. What Are the Neighbors Like?
You may not be able to figure this out right away, but if you’re looking to move to that property at some point in the future, you need to study the neighbors.
- Do they have a big shooting range and always shooting clay pigeons?
- What about a noisy motocross track?
- Do they have a landfill about a mile away where the wind could blow and make your house always smell?
This is not easy because you usually can’t figure it out the first time you show up. You need to go there a few times in the evening, and in the morning. Go knock on their doors and talk to them. Let them know you are thinking of buying the land to build on. Find out who they are and what it’s like to live there. I have literally walked away from deals because of all three examples.
9. Endangered Species
This is a very real problem if you’re looking to develop land in any way after you acquire it. Whether you’re building your dream home or you have visions of building a subdivision, you need to know if there’s any endangered species because that can shut you down forever. The same people that do the wetlands delineation can help you with endangered species. In order to use wetlands mitigation credits, you first have to get a delineation done by a civil environmental engineer, who then brings it to the water management district person. Then they go out there in person and actually agree on where the wetlands are and where they’re not. The mapper just gives you a relative idea. That same person can assist you with endangered species.
In Florida, one of the issues we deal with are gopher tortoises, which are everywhere and they’re endangered. They will charge you $6,000 to pick it up and drive it over to some state land and drop it off. So you need to figure this out if you’re going to be doing any development.
If you’re just flipping land, this won’t really be an issue because by the time you flip it, it will be somebody else’s problem. However, make sure you don’t find out about it. You’re better off being ignorant of the problem if it is a problem.
Zoning is a very, very important part of land deals and usually is county specific or city specific. This is the aspect of land owning that’s going to take you the longest to understand. You’re going to have to dig deep to learn exactly what zoning allows and doesn’t allow with that piece of property. One of the reasons why this becomes so difficult is because there’s so many shades of gray as well.
I don’t recommend you ever get into the business of trying to change zoning. It’s a nightmare and takes several years. It doesn’t always work out because, for example, the people living in that area vote against it. Instead you’re looking for properties that already have the correct zoning, and not just the underlying zoning.
There could be zoning overlays that can play a key role as well. I’ve done some deals in Daytona that had a zoning overlay that allowed me to do vacation rentals. Now that of course got pulled aside once the Hard Rock, Marriott, and Hilton all moved into Daytona Beach. They got rid of some of my vacation rentals by connecting with the legislature and removing some of that overlay loophole that I had discovered. Get your zoning dialed in and understand exactly what you can and can’t do.
Another example of zoning is conservation easements. There are deals in Florida where you can buy 400 acres for $1,000 an acre. There’s a lot of those deals and you know what those are? Those are conservation easements. That’s when the landowner sold the land to the government in what’s called a conservation easement and got paid $4,000, giving the government complete control over the land yet you still own it. You can basically run some cattle on it and that’s about it. It’s crucial you understand the rights or the lack of rights that you have with zoning.
However, in America, you don’t actually own the real estate. You have your name on the deed, but technically the government owns the land. The government has complete control over the land and what you can and can’t do. They also charge you what I call rent or taxes on the land. If you don’t pay that rent or those taxes, they take your land away. I have a video called Biggest Lie in Real Estate you can watch to learn more about this.
Zoning Impacts Value
Zoning typically has the biggest impact on values. It can be zoned commercial, industrial, agricultural, or residential. Then you need to consider how many units per acre you can develop with zoning which will be specific to your area.
Each one of these tips will enable you to negotiate better if you’re trying to talk a seller down. It will also give you confidence when you find land that has some powerful intrinsic value because it has many of these features in the position you want them in. You can also use some of this wisdom to negotiate good deals and resell them.
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