Is lot/land for sale any worth?

Question

Hello,

I have been looking for single-family/multi-family for investment for past few months but having no luck.

1. Does anyone know if buying a lot is a good investment option?
2. Do they appreciate?
3. I understand zoning is important and some of them are zoned for multi-family and others single family. Do builders prefer buying lots and building?

Any gotchas or red flags I need to consider?

Thank you!

Scott Schnabel · Answer

I don't know your market but here in Northeast Ohio buildable land has been difficult to find.  My niche market has been finding land for homeowners to build on. If it's even decent $40K seems low. What do I look for;

Zoning, Setbacks, utilities, easements, Deed restrictions, flood zones, wetlands, dimensions, neighborhood, and comps.  Most new builds to day are ~60 ft wide.  average sideyard setback is 10'.  S you need ~80' of width

I think looking at it as an investment will require a long, long hold time and even then...

Vasudev Kirs · Answer

Thank you Account Closed for sharing your insights - very helpful.

James Wise · Answer

Rule 1 - location location location

Vasudev Kirs · Answer

Thank you @Scott Schnabel and @John Mocker. I am hearing your opinions and suggestions loud and clear.

John Mocker · Answer

Vasudev,

One thing I can add.  You need to have Liability coverage for a Lot.  In some cases, you can extend your Homeowners Liability to cover that lot.  Depending on the company, you may have to get a sepparate policy if the lot has had any improvents (cleared, electric run, Plumbing run, grading, etc.).  Also, if the Land is owned in a Corp or LLC it may be a problem to cover it though your Homeowners.  Check with your agent.

Vasudev Kirs · Answer

Wow! Thanks, Christie, for giving specific, actionable items. I am going to be on it - the lot is 40k but as you said it could be easy to lose money. This seller bought it for 7700 and selling it for 40k.

Christie Gahan · Answer

Any gotchas or red flags I need to consider?

At least 100!

Varies on the laws of the state you are doing business in, demand, and local zoning laws.

1. Financing: Not very many ways to borrow money to buy a lot.  The lot doesn't generate cash flow so it does not throw off any money to make a payment with.  If you pay cash, that money could be stuck there for years until you sale but you will have some costs of property tax, brush clearing and insurance.

2. Best way to know what builders want is to get on the phone with some and see what they are looking for.

3. Is this lot in an older neighborhood that is getting popular again?  Or in the path of progress?

4. Go to the website for the city that the lot is in.  Learn how to read the zoning maps.  Can you build a house there?  What is the min lot size?

5. Learn the geology of the area.  Is there a creek?  Is the soil to sandy or swampy to build on?  The zoning maps may show that you can build but the geology would make it to expensive for someone to actually build with out losing money.  Ex: a sloped lot could require a basement where a flat lot would not.

6. Look at aerial maps.  This can show some creeks etc.  Depending on the area, there can be restrictions on cutting down trees.  If there is a 100 year old oak on site, maybe it isn't buildable any more.

7.  Infrastructure.  Where are the local public water lines?  Power lines?  The cost of bringing a waterline to a property can be crazy.  Does this site need a well?  How much is that?  Is there any water to be found?  A lot in town with a paved road that has water/power hook ups in the street may be $100k more then a lot out side of the city limits but that doesn't make it a good deal.   You have to know the cost of getting water and septic installed before you know if it is a good deal.

8. House on a large lot.  Another version of this is to buy a house on a really large lot and split the lot to create a house on a smaller lot and a seperate lot that somebody could build a second house on.   In some parts of the U.S.  that would be a 60 day project and in some parts that would take over a year.  In some areas, the city would require professional reports on geology, water run off, traffic and street improvements.  Just the geology report can run you $20k.

9.  Yes, you can make money but it is easy to lose money.  Plan on a year of study and learning before you spend any money.

Is lot/land for sale any worth?

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