When trying to determine the value of a vacant land lot, you will need to know how to find out if the land is buildable.
Several factors will determine what a developer can do with a vacant lot. In the following article, we will share some tips to help determine if a land lot is buildable before purchasing.
Start With Your Due Diligence
One of the most critical processes you will need to master as a land investor is doing due diligence on any land lot you intend to buy or sell. Your due diligence can include everything from an appraisal to a per-location test to a trip to the courthouse to conduct a title search. Your due diligence should thoroughly investigate the factors determining whether your land lot is buildable. If you intend to market a lot to a developer, you might want to find an experienced builder to help you through the due diligence process. This is the best way to find out if land is buildable.
When conducting your due diligence, with the view to establishing whether the lot you are interested in buying is buildable, you will need to consider the topography, access to infrastructure, and zoning restrictions to get a complete picture. Once you have all of these facts, you will have a better idea of what a developer can do with your land lot, which will strongly impact your fair market value.
How Long Should Your Due Diligence Take?
According to Jack Bosch, the founder of the Land Profit Generator and one of the most experienced land investors in the USA, “your due diligence can take anywhere from a week or two to a few months. That is why we strongly advise our students to start the land acquisition process with neutral letters, rather than blind offers.”
When you do blind offers on properties, you must do your due diligence on every single land lot you have identified in a county before you send a blind offer. The problem is that you might end us doing hours of work on a land lot, send a blind offer, and the landowner simply ignores you. This happens in most cases, which is why we suggest you only start the due diligence process once you have established that the landowner is willing to sell.
Therefore, before you start finding out if a land lot is buildable, it’s advisable to establish that the landowner is, in fact, willing to sell.
Schedule A Perc Test
When doing your due diligence before buying a property, the first thing you should consider doing is a percolation test (known as a perc test.) If you want to find out if land is buildable, understanding the water and sanitation restrictions is essential.
A perc test determines the water absorption rate of the soil on your lot. If your lot is not connected to piped water and the municipal sewer system, your perc test will determine if a septic tank can be installed on the property.
A perc test is conducted by drilling or digging a hole in the ground and pouring water into the hole. The rate at which the water drains away is then recorded. The perc test can only be conducted by a licensed excavator or engineer. You will incur costs when commissioning a perc test on a land lot, which you will need to consider as a land investor.
It’s a good idea to make sure that the landowner is, in fact, serious about selling their land before incurring costs to ensure that you don’t lose money on the deal.
Access To The Property And Identifying Any Easements Or Encumbrances
Properties that are accessible by road are more valuable than land-locked properties. One of the first things you will want to establish is if the prospective lot is accessible by road. A property with neither legal nor actual road access is classified as landlocked.
However, if the county records show an easement to the property, there is the legal right to access it. An easement is the right to use or enter someone else’s property without owning it. It means you can take a backhoe and grade the road over that easement into their property. The owner of the land the easement is on cannot prevent you from doing it. The rights for the road are already established, even if the road doesn’t exist.
You will get an accurate understanding of legal access to your property by conducting a formal survey of the land.
Municipalities Can Be Your Best Friend Or Your Worst Nightmare: Familiarize Yourself With Their Ordinances
Land use is governed by a wide range of local, state, and federal regulations. Once you have all the information you need about the topography of the land lot and its suitability for building, you need to establish the legal status of the lot. This is a key to find out if the land is buildable.
Most properties will come with some limitations, and you must know what those limitations are. Potential restrictions include zoning, building codes, subdivision regulations, and deed restrictions.
The most common form of land-use regulation is zoning. Zoning regulations and restrictions are used by municipalities to control and direct the development of a property. Your local zoning laws will determine the zoning district of the property. Fortunately, zoning ordinances and maps are public records — freely available to every potential land investor.
Fortunately, zoning restrictions can be challenged. Zoning regulations are based on factors including the needs of the municipality; the location, size, and physical characteristics of the land; the character of the neighborhood; and its effect on the value of the property involved. Over time these factors can change. If you believe that the zoning of the property is not in line with the changing needs of a community, you can apply to have the zoning reviewed. It’s advisable to consult with a certified zoning lawyer if this is an avenue that you are considering.
What do you do with unbuildable land?
Once you have completed the due diligence process, you will have a clear idea of whether the land in question is buildable. If the land offers a solid opportunity for developers, you will be able to market the lot accordingly.
However, if it turns out that the lot is unbuildable, it does not mean that you have to walk away from the deal. The first thing that you will want to do is inform the seller. Any offer you put on the table will be in line with a lower fair market value, based on the fact that the land is not suitable for development. Your next step is to find the right kind of buyer for the lot. Many buyers are looking for land lots they do not intend to develop. This includes camping enthusiasts, RV hobbyists, and recreational hunters, to name a few.
Jack Bosch points out that “only about 10% of the lots that we flip are ideal for developers. Our best buyers are private individuals who want a piece of land to enjoy.”
Learn more about how to sell rural land lots HERE.
