Excerpted from Neil’s latest book LandBook – An owner’s manual for rural land (second edition) ~~~~~~~~ There is no other single aspect of land ownership which more completely captures the imagination than the actual selection and purchase of the land. Sometimes however, on the way to acquiring the ideal tract of land, many folks, for whatever reasons, wind up owning the less-than-ideal parcel that needs to be sold before real-property nirvana can be achieved. Whether you inherited a piece of property that doesn’t mesh with your goals, discovered that you simply need to live in another part of the world, or even if you bought a piece of property and later just fell out of love with it, selling land, particularly in a poor market, can appear to be a daunting task. The amateur’s first reaction is usually to list with a real estate agent and hope for the best. Now, far be it from me to discourage using an agent. This certainly is the easiest way and not necessarily the least profitable or most expensive, especially in a booming market. In a less-than-booming market, however, it’s good to remember that listing your property with an agent will subject it to comparison with dozens, perhaps hundreds of other listings, all competing with yours in features and price. Selling your property then, will probably require that a potential buyer finds it to be either the best he sees… or the cheapest. If you have unimproved land to sell, you may also find that the majority of agents are more interested in selling more expensive improved properties where they stand to make much larger commissions (and get fewer ticks) so your five acres of woods may get short shrift when it comes to exposure to the market. This wouldn’t be such a big problem were it not for the fact that these days, more and more brokers are insisting on exclusive listing contracts that obligate you to pay them a commission even if you sell the property yourself to the fellow next door. That’s why you may want to tackle the job on your own. These days, you can set your land apart from the crowd by marketing and selling it yourself. Since the advent of the internet, it’s easier and more effective than ever, and the phrase “for sale by owner” has a particular cachet about it that buyers seem to like. Many buyers assume that they’ll be saving the sales commission by buying directly from the owner. Of course, you’re probably assuming that you’re saving the sales commission by selling it yourself. Which of you is correct depends on how adeptly you handle your sale.
Evaluating Your Land from a Seller’s Standpoint
The first step is to decide on your price. The timid choose a price too low, and the foolish pick one too high. What you want to do is find the right price that will yield a reasonably quick sale, but not generate a stampede of skinflints to your door. To determine, or appraise, the value of land, you need comparables. Using the internet, finding these is easier than it’s ever been, although there are also a few new pitfalls. The best places to find your comparables are the places where you plan to advertise. In a moment I’m going to recommend that you advertise on the internet, so you shouldn’t be surprised if that’s where I recommend you gather your comparables as well. In choosing comparables, you want as many tidbits of information as you can find; that’s the primary reason why the web is the best source, because the people writing the advertisements there aren’t usually paying by the word – although you’ll find that they can still be infuriatingly vague. Here are the basic things that must be considered when appraising land: Size: The fact that you find 80 acres, or 8,000 acres, selling for a given amount per acre tells you virtually nothing about what your 8 acres is worth, so ignore it. Rather, classify your property somewhat like this: is it from 0 to 3 acres? 3 to 8? 8 to 15? 15 to 40? Of course it can’t be all that cut-and-dried, but remember to only compare your rural property to others of about the same size – nothing has greater bearing on the value of unimproved land than size, except, to a degree, location. Please note that I am NOT going to repeat the old saw about the three most important things to know about real estate. Unless you spent your formative years in a cave, you’ve already heard it enough times to make you wish you hadn’t. I’ll assume that, as an adult who can read and operate a computer, you already know that the price of your 40 acres in western Kansas has very little to do with the value of New York’s Central Park, but you do need to make a distinction between a property that’s a thirty-minute drive from a city and one that’s two hours distant. I’ve found that most people draw an invisible line at a thirty-minute commute whether they’re commuting into L.A. or Buzzard’s Bluff. Additionally, you shouldn’t compare land from outside your region. West-coast prices aren’t applicable to West Virginia, and vice versa. Okay, that takes care of the broadest measures. Let’s assume you’re looking for comparable land to your forty acres in rural Tennessee, we next start to evaluate the features of the land. Water: Lake or river frontage is more valuable to most people than a non-navigable stream, which is more valuable than a spring, which is more valuable than a pond, which is more valuable than no water at all. Almost everyone wants water frontage, but not everyone is willing to pay for it. Soil Terrain and Vegetation: Most small landowners will prefer a mixture of hill and valley, but level agricultural land is usually more expensive than hilly ground. However, if your property is smaller, say less than eighty acres, there will probably be a better market for the mixed terrain that includes level bottomland and forested hills. Likewise, the best overall market exists for small properties with a mixture of forest and meadow as opposed to all woods or all field. Improvements: A modern water-well is worth more than it costs to drill. In the Ozarks, for example, where the typical well costs around $6,000, I generally value them at around $10K. Access: While few in number, there are still some properties that don’t have legal access – that is, a deeded access-easement, or frontage on a public road. This is what is known as “landlocked” property, and it is of considerably less value. If you see an extremely low-priced piece of land for sale, it may be a bargain, or it may just not have legal access. Curing this can be fairly simple, but don’t count on it. If it were an easy matter, it would likely already have been fixed. In most cases, legal access will require a deed from the neighbor whose land you’re crossing, and folks tend not to like to sign deeds unless they get something of significant value in return. Utilities: Electric and phone. Check whether your comparables have, or don’t have, the same utilities that your property has. If not, and all other things are equal, price yours ahead of those that don’t have what yours does, or behind those that have what yours doesn’t. Buildings: This chapter is intended to address land-only sales. Obviously, if your land has buildings on it, those can add significantly to the value. If the buildings are of any value, that is, a livable house or a barn or shed in good repair, this may be harder for you to estimate or to compare with others. About the best you can hope to do is to compare the number of rooms/bedrooms, the square footage, the general condition, and overall appearance. If the buildings are of marginal value, give them appropriate ranking, however as advice to a potential seller of real estate (I’d tell a potential buyer something else) don’t discount that shack or hovel too severely. A lot of buyers seem to feel somehow assured if there’s a structure of any kind on a property. Maybe it seems less intimidating than starting with empty woods. So if it doesn’t leak too badly, and isn’t going to fall down in the next few years, you may consider bumping the price up a few thousand dollars, or leaving it where it is so that the building provides another inducement to buy. Finally, after you’ve researched all your research and compared all your comparables, it’s time to decide on your final price. Actually, this is the easy part: you bring all your comparables together and rank them – a spreadsheet like Excel is good for this. Put the price of each property in Column A, the “sort” column, and a brief description of the features in Column B. Now put yourself in a buyer’s shoes. Right away, you can see what’s a bargain and what may be overpriced. The idea is to price your property as a happy median between the two extremes.
Now that you’ve arrived at your price, you’re ready to put your property in front of the world. To do this, the first thing you need is a web page. Now, I suppose you could HIRE someone to make a page for you, but frankly, if you can read well enough to get this far in this book, you’re perfectly capable of making one on your own. Nowadays all of my favorite software packages come for the same price: free. So I’d check out what’s available at tucows.com or software.com. You can also make a tolerable web page using Microsoft Word (which probably came loaded on your computer) however, if you’ve never made any web pages before, you’ll probably also be needing web-space to put them on, and you can find both web-authoring software and web-space available cheap or free with a little thoughtful web-searching. Once you’ve got the mechanics taken care of, all you need to do is collect absolutely everything you can think of that will describe your property, which may include, but will not be limited to, a written description, lots and lots of photographs, perhaps taken in different seasons, information about the local area, last year’s real estate taxes, aerial photos, road maps and perhaps a .pdf or .jpg copy of the survey, if available. Next, it’s time to advertise. Depending somewhat on the type and location of your property, you can find a handful of free advertising sites on the web and you should employ these, preferably with a link to your web-page(s) if that’s permitted. However, few of these free sites bring you enough traffic to help much in the absence of some uncommonly good luck. That means, as it always has, that you’re going to have to pay for your advertising just as sellers always have, but take heart in the fact that you don’t have to pay nearly as much for national advertising as you did in the days of paper. Better still, if you put a hit-counter on your web page(s), you’ll be able to keep track of how much traffic you get from each source. That will give you an idea of which ads are most effective. Personally, I’ve had good experience with Google Adwords where you can set your ad budget to as little as one dollar per day. (You may be able to set it even lower, but let’s get serious, you DO want to sell this place don’t you? Adwords also coordinates with Google Analytics, which will tell you far more than you need to know about the traffic you’re getting to your pages. Also provided are ways to see how effective the ads you write are proving to be. LandWatch.com is another favorite source of mine which consistently supplies better-quality leads, that is, more serious clients, than Google and others.
Now it’s time for probably the toughest decision you’ll have to make about selling your property. Do you want to finance the price, or will you only accept cash in full? Perhaps I can help you out with that decision. If you finance, you are going to have a LOT more prospective customers than if you don’t, and if you make the terms easy enough, you will have even more. That’s not to say that there aren’t a few potential hazards involved in owner-financing, but in my view, the benefits far out-weigh the drawbacks. At first you may think that owner-financing means giving up all the money you expected to realize when your property sells, but if you look at it from the long-term view, you’ll actually make about twice as much at competitive interest rates. One of the first benefits of this is that when you collect interest on your sale proceeds, unlike an interest-bearing bank account, the interest on your land sale starts out as a large percentage of the payment and shrinks over the life of the loan. So the first payments made to you largely go toward interest. Moreover, even though you’ll not have a lump sum of money to place against another piece of land or some other big-ticket item such as a vehicle or home construction, you will have the guaranteed income to match your payments, or some such new purchases, including the interest. You’ll also get to keep a lot more of the money you’ll receive, because you’ll only pay income taxes in small installments over the years, rather than all at once, which is likely to bump you into a higher tax bracket. “But,” you’re probably thinking, “this ‘guaranteed income’ is only guaranteed by another individual — a human being just like myself and subject to all the same problems, foibles and weaknesses. What if my buyer defaults?.” That is a very realistic concern. Here’s a system I’ve devised that works well for me: To begin with, when I place my advertisements I make two assumptions: first, I assume that my buyer will want me to finance the sale, because this is the case about 95% of the time. Second, I assume that my buyer may very well default, especially in the first six months, because this happens about 25-30% of the time. These two assumptions prepare me mentally for the task ahead, and they prepare me physically to guide in the preparation of the documents I will use to consummate the deal. I accept a no-down-payment deal — only the first monthly installment is required to cement the deal. (I offer a discount for cash.) The deal I make is that the transaction is governed for the critical first six months by a Contract for Deed. That is, the title stays with me, if the buyer defaults, he simply loses his money, the deal is off, and everyone goes back to square one. However, after the buyer makes his sixth payment, I give him title to the property, that is I make and record a Warranty Deed to him, and hold a Promissory Note and Deed of Trust in return as security. Finally, as boiler-plate, I have the buyer sign a Quit-claim Deed back to me which is annotated to only be recorded in the event of a default. This, in one stroke lowers my foreclosure costs from around $1,500 to hire an attorney to perform a trustee’s sale, down to about $27 to record the Quit-claim Deed. Since I create all the contracts and deeds myself from standard forms, I save immensely on attorney’s fees. Using this technique, I am prepared both for the long-term sale as well as, should it be necessary, a fast and easy foreclosure.
Preparing the Property
Finally, you need to get the property into shape to show it to prospects. There’s probably not a lot you can do in this regard. This being unimproved land, it tends to rise and fall on its own inherent virtues or faults. The good news is that there’s probably not a lot that needs to be done. I’d recommend though that you consider three areas: 1. The Road: The better the condition of the access road, the better impression your property will make. If your land is three miles of bad county-road away from pavement, then I wouldn’t waste a lot of money making the access from the county road any better than the county road itself, but remember that you can do quite a bit to civilize a dirt driveway with a tractor and blade. If you don’t have too much length to cover, there’s no substitute for a layer of 1” crushed rock (or larger rock in deep mud-holes). One layer of 1” rock one lane wide will cost you about 75¢ per foot around my neighborhood. Needless to say, if the property is on a road maintained by the county, or some other local government entity, and if this road has any work that needs to be done, this is an excellent time to complain politely about it to the wonderful folks on the Road Board. Most counties grade their roads once or twice a year, but some roads that don’t get much traffic may be neglected if no-one complains. 2. Clean Up the Junk: If you didn’t do this when you bought the place, now is the time. Other than buildings of value, get rid of everything that didn’t grow there. This doesn’t have to be a major ordeal. First check out local laws regarding what, if anything, can be burned at your location. Nearly all states have laws against burning old tires and many forbid burning other items such as other rubber products; wire; treated, painted or finished wood; plastics; garbage; heavy oils; asphalt materials; building materials, especially those containing asbestos; paints; and agricultural and household chemicals. Then, if you have anything combustible, and plenty of water and a way to disperse it, go ahead and burn what you can, but make absolutely, positively certain the fire is out before you leave. “Out” in this case means cold to the touch. You may be able to use, or otherwise recycle, part of the remainder, and the rest you can take home to add to your home garbage-collection schedule, perhaps over a short period of time rather than all at once. 3. Bush-hogging: To make the place look its very best, bush-hog any brush small enough to be cut. If the place doesn’t sell quickly, do it every few weeks.
Closing the Sale
Now you’re all set to go. When you find a buyer, and after he’s given you money and signed your contract, it’s time to prepare for the closing. I strongly suggest that you be ready to get him to sign and notarize all the documents required at the very beginning of the deal, even though if you follow my suggestions, you won’t be recording most of them for six months. Good Luck! In today’s hot real estate market it’s relatively easy to sell your average house, but selling land can be tricky and knowing how to sell land can make a big difference when you want to sell your land fast. Unlike a move-in ready home, selling dirt can be challenging…in any market. It’s important to equip yourself with the right information on how to sell lots and land and to understand why your strategy with vacant residential land needs to be different from selling a home. Wondering how to sell your land faster? Read on, and follow our 9 Steps for Selling Land and Vacant Lots listed below.
The Land Market: Why it’s Different to Sell Lots and Land
Many people expect the market dynamics for lots and land to be the same as the market for existing homes. They are not. You’ll be better prepared to sell your home lot or land if you understand some of the differences between the land market and the existing homes market. What are the important things you should know when you want to sell land?
1. Lot and Land Buyers are Different from Homebuyers
These groups of people have very different perspectives, desires and needs. Homebuyers usually want move-in-ready, with granite countertops. Land buyers, whether individuals or developers, are looking for the right location and an opportunity that lets them customize to fit their needs. If you want to sell land to developers, you need to understand what is important to them.
2. Land Requires Different Sales Techniques
A home has a kitchen, bathrooms and a façade that can be visual and photogenic. You can hold an Open House for a home and walk a buyer through each room to help make the sale. Buyers can easily visualize themselves in – and fall in love with – the built home. It’s just not the same for vacant residential lots and land.
3. The Market for Land is Less Active
The market for existing homes is almost always more vibrant than the land market. There simply are fewer numbers of buyers for vacant land than consumers looking for homes. Start marketing a new home listing and a new lot listing when both are desirable and priced well, and you generally can expect fewer contacts about the new lot listing.
4. Patience is Required
Selling a lot or vacant land typically will take longer than a house. You have to be patient. But don’t be discouraged. Lot and land markets are hot across the country. Now is one of the best times in decades to sell land to developers and others looking for vacant land. And while some of these comparisons may seem disheartening, people successfully sell lots and land every day. We’re here to help.
9 Steps to Sell Lots and Land
While we have noted that there are many differences when selling land, at the same time the concepts are similar to selling a home. You just need to tailor your strategy, tools and focus for selling this type of property. Here are the 9 steps for selling land and vacant lots.
Step 1: Understand Who Your Buyer Will Be & What They Need to Know
When selling a home you know your target market typically is a home buyer in a certain price range. But when selling vacant land you must evaluate who your likely buyers will be among many other factors. Your buyer profile can depend on what type of property you are selling, whether the land has been developed already, its location and market conditions, among other criteria. Is your likely buyer an individual looking for a lot for a new home? Or is your buyer going to be a builder or developer looking for land for their next project? Or is your buyer some combination of those, or someone different altogether? There may be different buyers for finished lots, rural acreage or a parcel of suburban land in a thriving new home market. After identifying your likely buyers, try to think like them so you can focus your message to convey what they need to know about your property. Have information ready about schools, shopping and other nearby amenities. For developable land you can be prepared with zoning information and insight from local authorities about the location and capacity of water and sewer service. Each property is different, so customize your information for your situation and your targeted buyers. If you don’t know these details, then do some research. When you are prepared and knowledgeable about your lot or land you can make the process easier for potential buyers and inspire faith with solid answers to their questions.
Step 2: Have the Land Ready
First impressions are lasting in real estate. When selling a home you would never leave out your dirty laundry for potential buyers to see, and you should also clean up your lot before it is shown and marketed. Cut the grass (or weeds), remove trash and take marketing photos of your property when it is looking its best. Some sellers even plant wildflowers to make their vacant land look beautiful. It’s like staging a home, but you’re just working with raw land instead. Also you should consider having your property surveyed in advance and mark your property boundaries. For home lots, show setbacks on the survey too. This will provide useful information and help buyers see the potential in a property to encourage a sale.
Step 3: Choose Your Price Carefully
Pricing can determine your success in attracting potential buyers, and pricing your lot or land too high is one of the biggest mistakes that sellers make…and regret. The wrong price will both scare away buyers from even inquiring about your property, and will cause your property to take longer to sell. Pricing land can be trickier when compared to pricing a home. Developed lots in communities may have a clear “market” price based on the recent sale of similar lots. Raw land, however, may have fewer “comparable” sales to use in determining your price. In addition, the price you ultimately can attract for a singular lot or undeveloped land can vary greatly depending on the buyer’s intended use of the property. For example, if a buyer feels that your acreage is appropriate for a high-end home development it likely will bring a higher price per acre than if a buyer only intends to build a single home on it. Consider your own needs when pricing, and understand how pricing could impact buyers’ interest. When selling real estate, you sometimes have to choose between getting the highest price and possibly selling quicker. Plus, your pricing may be influenced if you need to sell for financial reasons. In addition to your own situation, pricing your property ultimately requires an understanding of the land market as a whole, why people are buying lots or land in that area and who these people are. A good real estate agent with land expertise can help greatly in this process.
Step 4: Offer Financing
The lending market for vacant lots and land is more difficult than new home loans, so many buyers have trouble getting financing. You should have a larger pool of potential buyers if you are able to offer some type of owner carry or financing.
Step 5: Use Online Listings Targeted to Lot & Land Buyers
It’s probably obvious that you market a home to homebuyers. It follows that you should market your lot or land directly to lot and land buyers. Online listings are an important part of any real estate marketing plan, and you should make use of all the available tools. When you market your property online you want to target people who are looking for lots and land. MLS usually is a first step for real estate agents when they get a new home listing, and it certainly should be part of any real estate marketing plan. But you should keep in mind that MLS is focused on marketing existing built homes, and should not be the only online marketing tool used for your lot or land listings. LotNetwork.com was specifically designed for selling residential lots and land, and attracts targeted lot and land buyers like potential homeowners, builders, developers and investors, among others. Your understanding of your buyers and the market comes into play when you are preparing your listing. Craft your message in your listing to provide the information that your likely buyers need.
Step 6: Show Your Property At Its Best
It can be challenging to market vacant residential lots and land because there is no move-in-ready home. Homes are visual, convey a sense of place and evoke emotional responses from buyers. But there is no house for an Open House when selling lots and land. Be sure to use visual tools to tell the story of your lot or land in your online listing in a beautiful and compelling way. You can’t show photos of a kitchen or great room, so be creative with your lot or land photographs. Use attractive photos of the home site, natural features of the land, the view from your property and even community amenities (see tips for creating great photos for lot and land listings). Use maps and surveys to show the property boundaries and where it is located. Learn more in our related article about 5 tips for selling lots or land with online listings. And although it may not be the same as an Open House, you always should offer to “walk the property” with a potential buyer. You can show them the property lines and tour things like the neighborhood pool or walking trails. Use this opportunity to strategically point out the positive aspects and minimize the negative aspects.
Step 7: Tell the Story with your Sign
In addition to online listings that target lot and land buyers, effective property signs always should be part of your marketing plan. Don’t just use a standard “For Sale” sign; we suggest that you have a sign custom-made for selling your lot or land (which can be done relatively inexpensively these days). You can help tell the story with your custom signs by including a few key points like acreage and property features. You should locate your sign(s) for visibility and keep them clean, upright, and professional looking.
Step 8: Talk with the Neighbors
Try some focused marketing strategies too. When selling a home you typically would not go to the adjacent homeowner to see if they want to buy your house, but when selling a lot or land the adjacent property owner often can be one of your best opportunities for finding a buyer. You can give the neighbor a call – they may want to buy your land for extra buffer, to add to their property holdings or just to control what is built next door. Another strategy is for you to directly contact active builders in the area to see if they are interested in your property.
Step 9: Work with the Pros
Having a knowledgeable professional on your side always helps when selling your lots and land. There are many benefits from having specialized expertise on board, so we encourage you to work with a real estate agent who specializes in lot and land sales. They will help you understand the market, set a price and market your land to the right buyers. Selling lots and land has its unique challenges and strategies when compared to selling a home, and these are several of the ways you can boost your selling efforts. Whether you’re just starting the process of selling your lot or land or you need to re-energize your efforts, we hope these tips help you. So take action and find a way to reach past the home buyers and get to that pool of active lot and land buyers. What have you found that helps you in the lot and land selling process? Let us know in the comments! Check out our page dedicated entirely to Tips and Resources for Selling Lots & Land. Agents and Brokers, check out our page that highlights some of our resources for real estate pros and how LotNetwork.com can help you and your business. Start your online listings today to help you sell your lot and land properties: Related Articles:
- Online Listings to Sell Land or Lots: Five Tips to Help Spur a Successful Sale – LotNetwork.com
- Sell Land, Development Projects & Portfolios of Residential Lots with “Project Listings” — LotNetwork.com
- Photos Sell Real Estate: Tips for Great Photos for Lot and Land Listings – LotNetwork.com
- Tips on Using Screenshots and Cropping for Better Property Photos — LotNetwork.com
- Reach More Lot & Land Buyers: Upgrade Your MLS Listings On LotNetwork.com – LotNetwork.com
Raw land is the new up-and-coming investment star of the land industry. Previously, undeveloped land was considered somewhat worthless, and most people preferred to invest in developed land. In recent years, many landowners are starting to realize that raw land is a low-maintenance way to hedge against inflation and save for retirement. This article discusses the ins and outs of this land type and the basics of buying and selling undeveloped land.
What is Raw Land?
Firstly, let’s define “raw land.” Raw land refers to a property in its most natural state. Raw land has no commercial developments, like homes, buildings, or walking paths, and has not been cultivated for livestock or crops. Up until recently, most people didn’t invest much thought or time into raw land. It was dismissed as a poor moneymaker since it didn’t feature any artificial improvements and generated zero income. These naysayers failed to realize that although raw land doesn’t generate income on its own, the land itself can increase in value- land is one thing that cannot be created. As more and more land is developed, raw land becomes rarer, and its value increases. This gradual increase in value makes it a solid long-term investment opportunity. The value of raw land can also be increased by getting rid of environmental hazards or invasive plants.
Why Is Raw Land A Good Investment?
Land, in general, is a great investment choice to save for retirement. Raw land is gaining popularity as a means of retirement savings thanks to its low-maintenance nature, 1031 exchanges, and ability to change the land to a “higher value” asset. By developing the land to its highest-value, optimal use (i.e., for crop farming or subdivision lots), you can increase the value of this asset. Raw land tax benefits are a bonus to investing in raw land for retirement. Raw land tax benefits are engineered to protect investors from losing money on their land investments. Bill Humphrey, CEO of New Direction IRA, notes that confident investors may not know that property is a permissible retirement asset. Tax-advantaged savings vehicles like 401(k)s and IRAs can own a commercial building, house, or vacant land the same way they can own stocks. These kinds of accounts boast tax benefits to help balance any tax-related concerns that may otherwise cause a real estate investor to hesitate. Thanks to these advantages, pre-developed land is becoming more prominent as a viable option for real estate IRAs.
Types Of Land
Investors can choose from different kinds of land, including raw, agricultural, commercial, and wetlands. Undeveloped land ownership opportunities and business ventures can generate significant ROIs for small investors while still offering traditional land ownership attributes.
Residential And Commercial Land
With a virtually limitless number of land development opportunities that can be structured to meet an investor’s time and capital constraints, commercial and residential land development offer a viable path to investment. Real estate investment trust (REIT) ETFs are an excellent choice for most small investors since they are broadly diversified by property and geography type, do not need direct management, are relatively inexpensive, and are geographically diversified. Some ETFs specialize in a specific kind of real estate. Still, others, like the Vanguard REIT ETF (VNQ), offer diversified exposure to office, industrial, healthcare, retail, residential, and public storage property developments. However, residential and commercial real estate land development prevents the landowner from enjoying the land. For people who want to create security for their retirement and simultaneously enjoy the feeling of land ownership, residential and commercial land developments may not be the way to go. Moreover, residential and commercial land development may also require annexation to a city, zoning changes, entitlements, etc.
Row Crop Land And Livestock Operational Land
For those looking to enjoy the land in the home-owning sense while generating income, there is the option of purchasing land for row-crop farming or running a livestock operation. However, buying land for these kinds of enterprises comes with a host of issues. The scale necessary for operating a row-crop or livestock operation has to be extremely large to be viable financially. This requires a substantial upfront capital outlay, which puts the investment beyond the reach of most small investors. Moreover, there are incredibly high ongoing fixed costs that come with running these kinds of operations. Small-scale orchards or farm investment opportunities may be a better choice for investors with less capital.
What are the Risks of Buying Land?
There are certain legalities tied to specific uses and parcels of property. Land-use restrictions may restrict how the owner can use the land, and land easements may give unrelated parties access to part of the property. Mineral rights may grant outside parties the ability to extract and sell minerals from the property. Other risks include access to essential utilities like telecommunications and electricity, along with zoning violations and short-term lack of income. Looking for agricultural investment opportunities? Invest with Land Income today!
How To Buy Raw Land
Now that we’ve established the value of raw land as a long-term investment let’s discuss how to buy and sell land.
1.) Locate The Land You Want To Buy
While prospective landowners may dream of happening across a plot of land that happens to be the perfect investment, such situations are rare. If you are determined to purchase land but don’t have any specific properties in mind, you should begin by searching online. If you need help with sifting through all possibilities for a match that fits your specific criteria, you should reach out to an experienced real estate agent specializing in land plots.
2.) Research The Land Extensively
It’s not the Land Rush of 1889- don’t be scared about all the land getting snatched up. It’s essential to research your investment thoroughly before you make any significant moves. First, you should look into the zoning laws for the county you’re trying to buy land in. Zoning laws are local government rules and regulations stipulating how property can be developed. If someone is trying to sell off individual lots, for example, they’ll need to find out if they can legally subdivide the land. Such information can be found at municipal offices. Other information you should research include if the land has any entitlements, environmental problems, and overall usability. Analyze the soil, water sources, any prior chemical treatments, and location. The most common zoning restrictions include:
- Building type
- Businesses NOT allowed
- Building size and height
- Utility line location
Some permits you may need include:
- Road access
3.) Decide How You Will Finance The Deal
If you can make a cash offer, you’ll need to get a couple of documents in order. The seller will want to see proof of funds to establish that you can cover closing costs and the down payment. If you’re going to finance the deal from agricultural lenders, you need to research and negotiate loan terms and types.
4.) Make An Offer To The Seller
A verbal agreement doesn’t hold up in a real estate transaction. Any details that may impact the value of the land you’re looking at will need to be put in writing. A bid-offer form is the most common kind of contract used to make an offer. The contract should include its location, price, any contingencies, and parcel number. When you make your offer, you may still have some lingering questions regarding the land, which is where contingencies come in. Contingencies allow the buyer to effectively back out of the deal if anything unsatisfactory comes up during the inspection period. After the seller accepts the offer, you may want to use a Sales and Purchase Agreement (SPA), another legally binding document. In certain states, the two forms may be integrated into a single contract, which is why you should do your research and carefully inspect any paperwork.
5.) Put Down A Deposit On The Land
If you’re making a cash offer, you’ll need to give the seller “earnest money,” which is a (usually) small amount of money that goes into escrow to indicate your seriousness as a buyer. If you walk away from the deal for a reason not covered by contingencies, the seller keeps the money.
6.) Conduct Environmental Tests
Environmental testing when purchasing land is as essential as getting a home inspection before buying a house. An environmental test will tell you if the soil is contaminated, sinkhole possibilities, or earthquake damage. Something else to watch out for is the soil’s moisture content. You’ll need to ensure the ground is stable enough to support any structure you’re planning on building.
7.) Conduct A Land Survey
Always have a land surveyor check the plot to mark exact boundaries and determine exactly how much land you’re buying. Surveyors will also mark any buried pipes and disclose certain parts of the land that are unusable.
8.) Conduct A Title Search
Liens may be placed on the land (just like with a house) for various reasons, which is why you should always check if the land has a clear title. A title search only costs around $100 and can determine if there are any special easements, assessments, or restrictions on the property.
9.) Do A Final Tour Of The Land
Before buying, it’s key to tour the land first. Exploring the property on foot gives you a better understanding of the shape of the property and allows you to confirm any findings from doing a title check or land survey.
10.) Close On The Land
You can pay the seller after everything is done to your satisfaction during the inspection period and the contracts are closed. If you’re buying the land with cash, you will probably close the deal with a cashier’s check, as personal checks aren’t accepted for large amounts of money. A cashier’s check can alleviate concerns regarding legitimacy since the funds are issued by the bank. If you’re paying through a loan, bank details need to be ironed out.
How Is Selling Land Different Than Selling Buildings?
Selling lots and land has a distinct dynamic from selling existing homes. Below are key differences between the existing homes market and selling a home lot or land:
- Land requires different sales techniques: A home has visual appeal like granite counters or wood floors. Vacant residential lots and land don’t make buyers fall in love.
- Lot and land buyers are different from homebuyers- These two groups of buyers have distinct desires, perspectives, and needs. Homebuyers are looking for move-in-ready properties, while land buyers are searching for the right opportunity and location that fits their vision.
- A less active market- The land market is almost always less vibrant than the market for existing homes, especially in recent years. This means that finding the right buyer will typically take more time and effort.
How To Sell Raw Land
While selling raw land is markedly different from selling homes, they both require sales acuity and preparation. Here are some steps to take when selling raw land.
1. Market To Your Buyer
You need to identify your target demographic. Your buyer profile depends on the kind of property you’re selling, whether the land has been developed, its market conditions and location, etc. Do your research to find the ideal buyer profile for your marketing efforts.
2. Prepare The Land For Sale
First impressions are vital, so make the land presentable (like you would a house). Get rid of trash, cut the grass, and take flattering photos of the land.
3. Price The Land Wisely
Account for your personal needs when pricing, and understand the ways pricing can impact buyers’ interest. Sometimes sellers have to choose between selling quickly and getting the highest price, so your pricing may be influenced by your current financial state. Another factor when pricing is understanding why people want to purchase the land and who they are. This is where an experienced real estate agent can come in.
4. Show Your Property
Use visual tools to construct a compelling story of your land listing. Be creative with your lot or land photographs, as it’s not as simple as showing photos of a great room or kitchen. Use flattering pictures of the site, the land’s natural features, and offer to “walk the property” with potential buyers.
5. Offer Financing
The lending market for land and vacant lots can be difficult, so many buyers may struggle with financing. If you can offer some owner carry or financing, you can expand your potential buyer pool.
6. Work With Professionals
Having a knowledgeable professional on your team will optimize the selling process. Work with a real estate agent specializing in land and lot sales who can help you set a price, understand the market, and market your land to the ideal buyers. Looking for agricultural investment opportunities? Invest with Land Income today.
Invest In Agricultural Real Estate Today
Land Income is a top agricultural real estate investment firm. Work with Land Income to invest in agricultural real estate or sell your land today.
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