{"id":123946,"date":"2022-12-12T03:48:37","date_gmt":"2022-12-12T11:48:37","guid":{"rendered":"https:\/\/www.rentcafe.com\/blog\/?p=123946"},"modified":"2025-05-07T23:15:10","modified_gmt":"2025-05-08T06:15:10","slug":"common-pitfalls-to-avoid-when-buying-land-for-homebuilding","status":"publish","type":"post","link":"https:\/\/www.rentcafe.com\/blog\/self-storage\/common-pitfalls-to-avoid-when-buying-land-for-homebuilding\/","title":{"rendered":"The Most Common Pitfalls to Avoid When Buying Land for Homebuilding"},"content":{"rendered":"

Building a custom home, one that suits all the wants and needs of its owner, is a dream for many of us. But before you start planning how your ideal home should look, you need to purchase a plot of land \u2013 a task that is even more important than designing the home. That\u2019s the one thing you won\u2019t be able to change about your home \u2013 the location. So, take at least the same amount of time for shopping around for land as you take for your design-related decisions. And, once you have found the perfect location, you might also want to rent self storage<\/a> in that area \u2013 building a house often goes off schedule, and you will very likely need space to store some of your belongings until the new home is all done.<\/p>\n

Additionally, when searching for a plot of land for your future home, it\u2019s essential that you consider all the practicalities and the financial and legal implications that might occur. For investors, establishing an LLC can provide invaluable legal protection during the land acquisition process. Choosing the best state to from an LLC<\/a> is important to maximizing these advantages, ensuring it harmonizes seamlessly with all of your investment objectives and land purchase plans.<\/p>\n

Here are the most important aspects you should pay attention to when purchasing your plot, in order to avoid potential land-related pitfalls:<\/p>\n

1. Zoning<\/strong><\/h2>\n

Zoning regulations establish the legal framework for plots of land within a municipality. Zoning tells you whether you can build, what you can build on a particular plot, plus other details such as the height of the building, the amount of space that can be taken up by construction, and so on. In other words, it\u2019s of vital importance to learn all the details regarding zoning before deciding whether to buy land.<\/p>\n

\u201cBefore investing in land, you should review the zoning restrictions,\u201d explains Kurt Walker, a realtor with Mill City Home Buyers<\/a>. \u201cThis measure would help prevent your money going down the drain. You should ensure that the state has allowed the construction of a home on the vacant land you are planning to buy. To avoid this pitfall, you can also seek help from the homeowner’s association and city ordinances,\u201d he added.<\/p>\n

2. Utilities<\/strong><\/h2>\n

If you\u2019re looking for peaceful surroundings for your new home, you might be tempted to purchase a plot of land that\u2019s more remote, or at least away from main roads. However, you need to find out whether you have access to public utilities (water, sewage, electricity, gas, internet connection) and, if not, how much it would cost to have them brought to the land plot. Don\u2019t count on the fact that the municipality will cover the costs, or that it cannot be that expensive. Contact the county or the city\u2019s authorities to learn the details about bringing utilities to the vacant plot and ask for a cost estimate as well. There are alternatives to public utilities, but they are generally expensive and complicated.<\/p>\n

\u201cCentering where the land is bought, the supply of utility is different,\u201d Matt Ward<\/a> tells us. \u201cAfter buying land to build a house, the owners realize there isn\u2019t enough usable water available in the area. Either there are no easy sources like rivers or ponds, or the water needs to be lifted from deep inside the earth which is expensive and another added cost. A lot of areas don\u2019t have a large power grid or enough cables which limit the amount of energy supplied\u201d, he advised.<\/p>\n

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3. Environmental hazards<\/strong><\/h2>\n

Depending on where the plot of land was located and how it was used previously, there is a possibility of it containing environmental hazards. This can happen especially in areas that were previously zoned for industrial activities, and unknowingly purchasing such a property can seriously burden your budget. Bruce Ailion<\/a>, an experienced realtor, details the risks of purchasing land without having all the information about it: \u201cAn acquaintance found what he thought was a great bargain on a foreclosed property he purchased from the bank to build a building for his business. He paid $250,000 for the land. However, when his contractor started moving dirt, he found that the property had been used as a tire dump. There were over 3,000 tires buried on the property. The municipal fee to dispose of them was $8.00 each plus the labor to remove them, and the cost of filling and compacting the soil cost over $175,000 to correct the problem,\u201d he remarks. Using an experienced realtor is thus very important when purchasing land. Also, you should check out land records \u2013 you can usually find them online, and, if they\u2019re not available this way, by contacting the county clerk or recorder\u2019s office for the area.<\/p>\n

4. Asset liquidity issues<\/strong><\/h2>\n

When purchasing a plot of land as a long-term investment, or for building a home at some point down the road, you need to be perfectly aware that your money will be tied up in that land. Generally, land value increases over time, but that\u2019s a long-term thing. If your plans change or if you need cash unexpectedly, it\u2019s more difficult to sell land than it would be to sell stocks, for example. Also, depending on how the real estate market was when you bought the land, selling shortly after you acquired it because you need cash, or because you changed your plans (you no longer want to build a home, you\u2019re moving to a different area, and so on) could end up costing you money.<\/p>\n

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5. Financing difficulties<\/strong><\/h2>\n

Loans for purchasing a plot of land are less accessible and generally more complex than your standard mortgage. They are riskier for lenders, as there\u2019s no house to act as collateral. These types of loans are approved if you have a great credit score (over 700) but expect higher rates compared to home loans. In some cases, a bridging loan<\/a> might be a useful short-term solution to secure the land while you arrange for long-term financing.<\/span><\/p>\n

6. Adverse soil conditions<\/strong><\/h2>\n

The area where you\u2019re interested in buying land might be prone to floods, or the soil conditions might not allow for the construction of your dream home. It\u2019s advisable that you hire professionals to perform a soil survey before purchasing the land, to make sure that it can properly support a foundation. Also, you should be aware that very sloped plots can incur higher foundation building costs.<\/p>\n

7. Building codes and homeowners\u2019 association requirements<\/strong><\/h2>\n

Make sure you have all the information about what can be built in the area before purchasing a plot of land. Otherwise, you might end up in a situation where you can\u2019t, for example, build an accessory dwelling unit on your plot or install a pool in your backyard. \u201cAnother potential pitfall is building codes,\u201d said Jennifer Spinelli from Watson Buys<\/a>. \u201cBe sure to research the building codes in your area to make sure that your home or other structure will meet all of the necessary requirements. Check the rules and regulations of the homeowners’ association as well. There may be restrictions on the type of home you can build or other requirements you’ll need to meet.\u201d<\/p>\n

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8. Incurring costs<\/strong><\/h2>\n

Buying a plot of land to build on it in the future can be a good investment, particularly if you find one that suits all your requirements. However, you should also consider the fact that owning a plot of land incurs costs (property taxes, mortgage payments, improvement costs, and even association fees if there\u2019s a homeowner association the area), without generating any type of profit. So, if you\u2019re planning to build a home, a good idea would be to start shopping around for land by the time you\u2019re also ready to start the construction. This way, you won\u2019t have to pay property taxes for years without drawing any benefits from that property.<\/p>\n

9. Underdeveloped area<\/strong><\/h2>\n

Some people want to find land in areas that are quiet and secluded \u2013 this way, they know for sure they\u2019ll have plenty of privacy after they build their home. Plots of land that are more remote tend to be less expensive as well. However, it\u2019s still important to ensure that the area has potential. You might change your priorities in the long run, and you don\u2019t want to be stuck to an area without services or amenities. \u201cUnderdeveloped land is the biggest downfall of a purchase,\u201d explains Jasen Edwards from AgentAdvice<\/a>. \u201cSo, buyers should check the plans of the authorities to determine whether they plan on developing the land or not. This can give a clear idea of what they\u2019re getting themselves into. You can\u2019t buy land without researching growth potential in the future,\u201d he concluded.<\/p>\n

10. Easements and deed restrictions<\/strong><\/h2>\n

Last, but not least, you need to know all the legal implications regarding the plot of land you plan on purchasing, to avoid a scenario where someone else shows up and builds a road through your property. \u00a0\u201cAnother potential pitfall to be aware of when buying land are easements and deed restrictions,\u201d argues realtor Shaun Martin<\/a>. \u201cEasements are rights that someone else has to use your property for a specific purpose, such as utility lines or access roads. Deed restrictions are limitations that are placed on how a piece of property can be used, such as not being able to build a commercial structure on a residential lot,\u201d he adds, emphasizing the importance of understanding the legal implications of the transactions.<\/p>\n

To make sure you march forward fully prepared, you should also consider getting self storage<\/a> close to the future construction site. It can prove extremely useful during the moving process, until your new home is ready for move in, and afterwards as you get everything in order. It will be much easier if you have a storage space nearby which you can access anytime.<\/p>\n

Buying a plot of land and building your custom home is a huge project \u2013 hopefully our suggestions will help you avoid major pitfalls and allow you to start off on the right foot.<\/p>\n","protected":false},"excerpt":{"rendered":"

Building a custom home, one that suits all the wants and needs of its owner, is a dream for many of us. But before you start planning how your ideal home should look, you need to purchase a plot of land \u2013 a task that is even more important than designing the home. 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