They often say that you should buy land because they aren’t making any more of it. However, just because people will always need land doesn’t mean that you can do anything with whatever property you find. Furthermore, investing in and developing land is very different from dealing with existing pieces of real estate. This multiplies the risk of making a mistake. Here are 3 things everyone should consider when buying land for development.

Understand that Property Investing Is Long-Term

However, the right property provides the opportunity to buy cheap and earn a handsome profit. Only buy property that has serious long-term potential for a profit, because this isn’t something you can flip like a fixed up single-family home. Recognize that most land only slowly appreciates in value if there’s nothing built on it. That’s why land can be a good hedge against inflation. If you want to build something on the property, it can take months or years to finish that project and then sell the property.

Understand the Ongoing Costs

Lenders consider most land purchases so risky that they’re unlikely to loan you money for it. They’re even reluctant to lend money to build a house on land you bought because there is no pre-existing home to serve as collateral. This is why you should buy property for cash. You’ll also be obligated to pay property taxes on the land as long as you own it.

There will also be costs associated with rezoning property, getting permits to build on the land, and marketing a completed property. Full-service real estate developers will be able to guide you through the development process.

Invest in Due Diligence

Zoning issues, soil quality, water rights, and development restrictions can all render property useless, and that may be why it is up for sale in the first place. If you want to buy a property that needs to be rezoned, know that it can take three to five years to go through if the change is approved. That’s why a thorough investigation is necessary.

Find out what is in the works for surrounding property. You may not be able to sell a row of single-family homes next to a new five-story apartment building. Nor do you want to buy land that is slated to be seized to build a highway in a decade.

Know what easements affect the property, since it may be hard to sell if the power company runs massive power lines across the back half. Beach property is less attractive to buyers if public swimmers have to use your stretch of waterfront.

Do your due diligence, such as testing to ensure that you can build a septic tank along with a house on the land if it can’t be connected to the local sewer system. Then there’s the fact that the land itself may be problematic. When you have soil testing done, you may find out that the rock under the soil is so hard you’d have to hire an expensive rock breaker to put in a foundation. If the ground is too soft, you’ll have to drill down to solid rock to put in a foundation and you don’t want to buy a property with groundwater or natural springs that make it almost impossible to build on.

Conclusion

Vacant land is one of the most misunderstood real estate investment opportunities. However, it can be one of the most lucrative if you find the right deal. Follow our few tips, and make sure that you speak with a professional who’ll be able to help you make the right decision.