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3 Ways To Dig Into The Dirt: Your Guide to Investing In Vacant Land

by Kyle Zaylor on September 1, 2014 · 2 comments

  
3 Ways To Dig Into The Dirt: Your Guide to Investing In Vacant Land

We’ve all been there at one point or another.

We pass by some vacant parcel of land for months, maybe even years.  We say to ourselves “man, I’d absolutely love to build on that property some day. It’s so underutilized.”

This hypothetical building could be a house, multifamily community, retail center, office space…it could be anything.  But we know in our gut what it should be and what the market would love to see built there.  Today, however, it’s only vacant land.

On the surface (no pun intended), land is simple and straightforward. It just sits there, doesn’t need much upkeep, and typically commands small tax bills and minimal holding costs.  The challenges with vacant land lie in uncovering the reasons why a specific property is vacant in the first place.  The reasons could be many and, unfortunately, they aren’t always easy to figure out.

Rest assured though because there are some strategies and techniques you can deploy quickly and cheaply that will do much of the initial heavy lifting for you.  If you’re looking at vacant land and want to get your due diligence underway, give these three strategies a go:

1. Talk to Everyone – the Local Planning Department, Neighbors, and Local Market Experts

Chances are these guys and gals know this property like the back of their hands.

 If you’re jazzed about this land, it’s likely at some point that someone else was too and inquired about it before you. If they got semi-serious and started going deep into due diligence, they should have been having information-gathering conversations with local planning and building officials, brokers, and neighbors.  This is where you can uncover untold stories about this land that you wouldn’t hear anywhere else.

2. Ask for Resources From the Current Owner

The current owner might have thought about building on this land in the past and could have resources that would give you a better understanding of what’s below the surface.

They might have site surveys, utility plans, and soils reports available that could disclose valuable information about how it all fits together.  If the owner has reports completed (assuming the information is up to date and relevant), they could help you plan for what would have been hefty unexpected costs.

A site survey could reveal the exact locations of set backs and easements–letting you see how and where a building could fit on the existing site.  A utility plan could reveal some large utility lines running directly through the parcel that might need to be rerouted.  A soils report will give you a sense for how robust your foundation will have to be when you start building.

Site-specific reports and studies should be part of any development budget. If they are already completed by the owner or others, and available to review, you’ve just saved yourself time, money, and information gathering steps at the start of your project.

3. Ask “What If”

One question to ask oneself when looking at a vacant parcel is to ask “why is this land vacant in the first place?”

Oftentimes there are very good reasons for this: restrictive setbacks render the land unbuildable, the parcel is located in a high flood zone, soil needs extensive remediation, etc.  These are all important elements that could tip the scale towards a ‘don’t build here’ scenario.

 Other times there could be one or two things that keep the vast majority of potential acquirers away.  In these cases, it could be helpful to ask “what if?” (on top of asking “why is this land vacant?” and “why am I so lucky to stumble upon this opportunity?”).

For example: ‘What if’ the neighbor will let me redefine an obtrusive easement that makes both your properties more valuable? ‘What if’ you can seek a variance on a rear set back that gives you just enough space to make the project work? You don’t know until you ask.

Land can be a double edged sword because on one hand it is low maintenance and relatively straightforward; however, it can be scary and intimidating because of the unknowns.

While it seems harmless and simple, the devil is in the details and, unfortunately, many times those details are hidden underground. Hopefully the three strategies above can help you save time and money upfront as you complete your due diligence.

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{ 2 comments… read them below or add one }

Liz Faircloth September 2, 2014 at 10:26 am

Thanks for the great article. We are getting into modulars, and we are closing on our first raw land deal. Thanks for the insight and advice!

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Kyle Zaylor September 3, 2014 at 7:04 am

Thanks, Liz. Good luck with the development project!

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