How to Buy Land

Decide Where to Buy Land

Topography

You need to consider the type of soil, the number of trees, and the elevation or flatness of the terrain. Those are all things that will affect the cost of building a home and the value of the land. For example, if you buy property in the wetlands, you'll have to deal with tough regulations and pay for an expensive septic system.

Find expert agents to help you buy your home.

Performing a full topography assessment is highly technical, which makes it tough if you aren’t trained as a geologist. That’s part of the reason why you’ll want to get a team of top-notch experts on your side as you navigate the land-buying process (we’ll talk more about that later).

Environmental Concerns

Make sure you’re aware of environmental dangers that could affect your land (like flooding or other natural disasters), as well as any endangered plants or animals living on the property you’re looking at. If you buy in a wooded area, check to see how many trees you’re allowed to clear. This stuff should pop up when you look at zoning regulations and topography, but it’s always better to ask, just in case.

Road Access

When you buy land, you need a way to get to it easily. If the roads leading to it are on someone else’s private property, you’ll have to get legal permission to use them.

The official term for that is easement, and it may come with a fee and an agreement to share the road maintenance costs. (No, baking cookies for your neighbor won’t get the job done.)

Even though it’s a hassle, easement is incredibly important to figure out before you commit to buying land. If you don’t have an easement, you won’t be able to get to your property—so you may as well not even buy it. Of course, if the roads leading to the land aren’t private property, you’re in the clear!

Utility Services

The land might not come with access to city water, electricity, cable lines or sewage systems, which would seriously affect its value. Check the city limits to see if you’ll have to invest time and money into building your own septic system, water well or electricity access. Don’t forget to check your cell service, too, when you visit your potential purchase.

CCRs

CCR stands for covenants, conditions and restrictions. These are rules imposed by an HOA or local government that could affect what you’re allowed to do with your property. The land may be perfect for your flamingo farm, but if the CCRs restrict the breeding of pink birds for some reason, you’ll need to look elsewhere.

Have Enough Money to Buy Land

This is where the reason you’re buying land really comes into play. That’s because the amount of money you should save before buying land depends on whether you plan to build a home, use the land as an investment, or start that flamingo farm.

And by the way, you’ll need to save some cash on the front end either way. If you’re trying to figure out how to buy land with no money, that’s a terrible idea. Buying land (or a house) with no money down is a major financial risk.

So, how much money should you save? Let’s take a look.

If You’re Buying Property to Build a Home

If you’re buying land so you can use it to build a home for your family to live in, the best plan is to pay cash for everything—the land and your future home. If that’s not realistic for you, taking out a loan is okay. But you need to know a few things before you go down that path.

First, you’ll have to take out separate loans for the land and the homebuilding. Getting a land loan is a very different process than getting a mortgage, and the rules are different too. That’s why you’ll want to work with a quality real estate agent, because they’ll be able to help you figure out which type of land loan you need and how much of a down payment is required (more on that later).

When it comes to the homebuilding loan, you’ll want to treat it like a mortgage. That means you’ll want to get a 15-year fixed-rate loan, and you should save up a strong down payment of at least 5–10%. If you can save up a bigger down payment, like 20%, that would be even better because you’d avoid having to pay private mortgage insurance (PMI) .

On top of all that, you need to make sure you’ve checked all these boxes:

• You’re debt-free. No car payments, student loans or credit card balances.

• You have a fully funded emergency fund that will cover at least 3–6 months of expenses.

• You know that your monthly payments between the land and house loans will be no more than 25% of your monthly take-home income.

If You’re Buying Property as an Investment

If your living situation is squared away and you’re buying land as an investment or for some other reason, taking out a loan is a bad idea. Don’t invest in land (or real estate, for that matter) unless you can pay for it in cash.

Going into debt for an investment will only bring you stress. You’ll have much more peace—and, ultimately, make more money—if you save up to buy land with cash.

You also shouldn’t buy land as an investment unless you’re . . .

• Completely debt-free with a paid-for home.

• Already investing 15% of your pretax income into retirement accounts.

• Saving for your kids to go to college debt-free (if you have kids).

If you haven’t hit all three of those goals yet, that’s where your focus needs to be for now.

So that’s the basics of how land buying works. Once you know where you want to buy land and you’ve got the money to do it, you need to get an all-star team of pros on your side. Buying land sounds easy, but it can be complicated, so you’ll want to work with someone who can help you do it properly! They’ll be able to help you with some of the more technical stuff we’ve talked about, like zoning, land loan requirements, topography and other words that are hard to pronounce.