As the housing market stays competitive, many buyers are opting to purchase land and build their dream homes. Buying land seems simple– and so much more affordable (up front) than purchasing a house! It can be a fantastic investment and a rewarding experience to design a custom home with all the features you desire. Land prices are on their way up so it is an excellent time to buy and invest in your future before they continue to rise. There are several things to keep in mind when purchasing land that not all buyers are aware of. Read on for 4 tips to help you decide if purchasing land is the right option for you!
It’s important to investigate what utilities are available at the site of the property. If purchasing a lot within city limits, there might already be electricity (and perhaps gas) at the property and be set up to connect to city water and sewer services. If the lot is outside the city, it is much more likely the buyer will have to pay additional development costs to bring utilities to the site. Power must be run from the nearest available pole at the owner’s expense–this adds up quickly if it any significant distance! Some developments provide a community well, while in many other cases owners have to dig their own. If there isn’t a city sewer system to tie into, a septic system must be installed as well.
2. Additional Development Costs
In addition to utilities, there can be other development costs as well. The land might need to be surveyed, soil or water testing conducted, or a perc test to confirm a septic system is feasible. If the lot is sloped, there can be additional excavation costs as well.
3. Building Costs & Timeline
It’s important to talk to a builder and get an estimate on building costs and timeline. In recent months, building material prices have skyrocketed, increasing the price builders have to charge. There has also been a building boom in the area and many builders are already booked for projects for the next several years. If you have a flexible timeline and budget, building can be a great option. If your housing needs are more urgent, it’s best to confirm with a builder they are able to work with your schedule before committing to a land purchase.
Codes, covenants, and restrictions (or CC&Rs) are a set of guidelines enforced by some housing developments. These CC&Rs can govern house size and style, vehicles allowed on the property, design review rules, and more. Make sure you have a good understanding of the CC&Rs of your desired neighborhood and that your dream home fits any criteria in place! Homeowners Associations (or HOAs) are a central governing body of a development to address shared expenses. If there is an HOA in place, there will be monthly, quarterly, or annual fees that go toward shared expenses. This can be road maintenance, snow removal, community water, etc. Find out if an HOA is in place and take into account when budgeting for your new home.
Buying land can be a wonderful investment and a great way to get into a competitive market. If you are thinking of purchasing land, our advisors are an invaluable resource in guiding you through the process and helping you determine if it’s the right option for you. Land is also selling at historical rates– don’t hesitate to reach out to an advisor and begin the discussion soon!