Buying Land to Build On

Land plot in aerial view for development or investment

Houses come in all different varieties from style, shape, color, and ameneties. But, who doesn’t love picking out every feature in their home? I know I do!

If you haven’t been able to find your forever home on the market with the low inventory, building is an option. However, it isn’t as easy as it seems. There is a lot that goes into building a home, and it starts with buying land. Now, most construction loans will allow you to wrap in the cost of the land and construction. You could also be buying the land now to build later. Either way, I have important tips for you to keep in mind when it comes to buying land.

First things first, understanding the cost is extremely important. Buying land is not cheap. Banks see land as a liability because they have nothing physical they can take back in the event that you don’t pay. If you buy just the land with a land loan, a few important items to note. You must be able to have at least 20% for a down payment. That means, if the purchase price is $100,000, you must have $20,000 for your down payment, not including the closing costs. Land loans typically have higher interest rates compared to home loan rates as well.

If you plan to build on the land, you will want to make sure the property is able to “perc.” A perc test is where they go out and take samples of the soil and its absorbency rate. They also evaluate how much space is on the land and determine if there is enough space for the well and septic to be far enough away from one another, while still within the property boundaries. Based on this, it will determine what type of septic system, whether conventional or alternative, and how many bedrooms that system is able to accommodate. If there is only enough space for a 2 bedroom system, that means the system can only keep up with a max of 4 full time occupants. Each bedroom equals 2 people. So, if you plan on building a 5 bedroom house for your family, you will want to find land that either has access to public utilities, or the septic is large enough to accommodate all of the residents in your home. Larger septic means it will need more space, which means more acreage.

If the ground doesn’t perc and it is found that the soil is not absorbent at all, there is an alternative system they can install to get around that. However, it is important to note that alternative systems can cost more upfront to install, and in the long term as well. So it is important you understand what it needs to maintain the system. Some counties require annual inspections to make sure the alternative system is in working order, so you will want to check with the local government to see what their rules and regulations are.

Aerial view of green field, position point and boundary line to show location and area. A tract of land for owned, sale, development, rent, buy or investment

One of the greatest things about land though, is that there is no more of it. What we see is what we got. They cannot make more land. Yes, people can decide to sell it, but unlike buildings, they cannot just build land. So, in theory, land only accumulates in value and can be a great investment!

And finally, one of the most important things when purchasing land is the covenants. Yes, they can have certain restrictions on land. Sometimes, it could be an HOA/POA rule, other times a previous owner attached it to the land. Things that I see come up a lot are minimum square footage and no mobile or manufactured homes. So it is very important you know what you are able to do with the land you are buying.

If you are thinking about buying land, reach out today and let’s chat about how we can make your dream a reality!

–As someone who chose to plant roots in the Valley, Amber loves to welcome people to the area and share all of her favorite hidden gems. Because, ultimately, she believes you should love where you live!

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Posted in Shenandoah Valley

3 Responses to “Buying Land to Build On”

  • Tex Hooper

    Written on

    I completely forgot about HOA rules. My septic tank needs to be replaced. I’ll have to check with the HOA to see what the rules are.

  • Henry Killingsworth

    Written on

    It stood out to me when you talked about how it is important to understand the cost of purchasing land. It seems like the boundaries and the amount of land you are purchasing can affect the overall cost. Working with a land surveyor seems like a good way to figure out the price of something like this.

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