10 Key Points to Understand Before Purchasing an Empty Lot

In the 1986 comedy "The Money Pit," Tom Hanks portrays a man who buys a crumbling mansion, only to find himself overwhelmed by constant repairs. The house initially seems like a bargain — until the stairs start to collapse and the chimneys fall apart. The moral: Never purchase a property without thoroughly researching it. While buying a vacant lot is different from buying a home, many of the same principles apply. Always understand what you're committing to and how much it will cost to construct a house.

Purchasing an empty lot is a significant and intricate choice, similar to any real estate investment. There are various reasons you might consider buying land. While a house purchase is typically for living in, land can be bought to build your dream home, hold as a long-term asset, or even establish a business. Land ownership also comes with challenges not found when buying a home, including potential restrictions on what you can do with the property, such as whether you can even build a house on it.

Before you invest in land, there are several things you should understand. Here are 10 essential factors to consider, ranging from basic costs and local regulations to land surveys and easement issues.

10: Property Location

Location is everything. This famous real estate saying perfectly captures the most fundamental factor in buying land. Regardless of the reason for your purchase, location should be your top priority. If it's for investment, avoid land with no future resale potential. If you plan to start a business, stay away from isolated locations far from your target market. And when building a home, choose a spot where you’ll love spending your time.

Before you begin looking for land, it's important to have a clear idea of where you want to purchase. Take a drive around the area and utilize online tools to assist in your search. For example, if you're considering buying land to build a home, factors like proximity to schools, work, grocery stores, and dining options should be part of your decision-making process. (We’ll dive into more detailed land considerations later.)

In other words, your land search should go hand in hand with evaluating the community. When you've found the perfect combination of both — a great community and a suitable plot — you’ll know you’ve made the right decision.

If you’re purchasing land for business purposes, the decision becomes more complicated. You’ll need to thoroughly evaluate the business potential of the location. However, if you're already planning a business, this should already be a key factor in your considerations. No matter the type of land, expenses can quickly accumulate, even before you begin any construction. Up next, we’ll look at some fundamental costs to anticipate.

9: Understand the Costs Involved

Investing in real estate requires both time and money; the more effort you put into preparation, the more effectively you'll be able to spend your money. What costs should you expect when buying a vacant lot? At some point, you may want to look into title insurance. It "protects owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property" [source: Hayes]. Think of it as your safeguard against legal issues related to the property. While title insurance isn't always mandatory, if you apply for a bank loan or mortgage, the lender may advise you to get it to secure both their investment and yours.

One additional expense to take into account is the cost of a land survey. Depending on the land you're interested in, a survey may or may not be necessary. If the property has been surveyed recently, you might easily find the information with a bit of research. We'll dive deeper into surveying later, but remember, hiring a professional surveyor to map out your land's boundaries might be needed. The cost of a survey can vary significantly based on location and other factors, making it difficult to estimate an average price.

Don't forget about the potentially high costs of utilities and construction. In some instances, you might need to pay to have electricity and water lines installed on your property before you can even begin using the services. Some properties may require you to dig a well or set up a septic system before any home building can begin. However, if you’re purchasing land solely as an investment, these challenges might not apply to you.

Regardless of the type of land you’re considering, you’ll need to understand the government zoning laws in place. We'll explore these regulations in the following section.

8: Zoning Laws

Zoning laws determine how land can be used. In simple terms, zoning laws prevent things like a Walmart being built in your backyard or a sewage treatment facility right next to a town square. However, the reality of zoning is much more intricate. These are the local regulations that dictate what property can be used for and where certain activities are permitted [source: Kenton]. Before purchasing a vacant lot with the intention of building a house, make sure zoning laws allow for that kind of development.

Understanding the basics of zoning is fairly straightforward. For example, residential areas are typically clearly designated. You can easily find this information by visiting the zoning office in any U.S. county or searching online for records related to any specific parcel of land. While you're exploring these records, don’t forget to check the county's long-term land use plans and any planned road expansions. These factors could impact future development, influencing whether your peaceful front yard stays tranquil or if a busy highway ends up next door in a decade [source: Kenton].

After navigating zoning regulations, it’s still important to be mindful of additional restrictions that can affect what you can build on a property. Up next: understanding the influence of homeowner's associations and local ordinances.

7: Ordinances and Covenants

Land designated for construction or resale is generally divided into smaller sections known as subdivisions. Properties in these subdivisions often come with pre-existing rules that you’ll need to be aware of before purchasing. If the lot you're interested in is within an established community, it’s likely governed by a homeowner's association. These associations collect membership fees and enforce guidelines for things like property appearance and neighborly conduct. For example, they might regulate the frequency of lawn mowing, parking restrictions, and even pet ownership [source: Christensen].

Subdivisions often have covenants in place, which are specific rules outlining how the land can be used. These covenants, or deed restrictions, are private agreements between the landowner and the buyer, distinguishing them from the zoning laws we discussed earlier. In urban areas, city ordinances might also be in effect, dictating how residents manage certain tasks or land uses, like garbage collection [source: Delich].

These restrictions might seem like a real pain, and at times they can be. However, they can also be quite beneficial. The important thing to remember is that these rules aren’t just for you; they apply to everyone. If you find a property with covenants you're comfortable with, you can rest easy knowing that your neighbors are subject to the same standards.

6: Utilities

For those looking to invest in land and keep it untouched, utilities may not be necessary. But for most others, they are a critical factor. Any vacant property you're considering for a home or business will need utility access. This includes electricity for power, gas for heating, and connections for internet, television, and phone. Ideally, you'll want to have some or all of these services installed before construction starts. One way to sidestep this issue is to purchase land that already has utilities installed.

If you don’t happen to get lucky with a purchase like this, there are a few things you'll need to manage, and unfortunately, they all come with a price tag. You'll need to coordinate with the power company to hook up your property to the nearest power lines. The same goes for the phone company, and when it comes to gas, you'll need to decide whether to install a tank on your property or connect to the local gas services.

Water and sewage may present an even bigger challenge. If the vacant land you’re eyeing isn’t within reach of existing water and sewage lines, you’ll have to install a well and septic systems. This adds extra costs and hassle since you’ll need permits for drilling the well and setting up the septic system. If you’re close enough to local utilities, though, the next hurdle to address is road access.

5: Road Access

Road access may seem like an obvious consideration, but it can be more complicated than you might expect when buying vacant land. In urban areas, it’s typically not an issue — but in rural locations, you might find that some plots are disconnected from major roads and are only accessible via private pathways. This can create several problems. If the land is entirely inaccessible by public roads, it may lack access to municipal water or sewage services, requiring the addition of a septic system and well, driving up construction costs.

The real issue at hand, however, is the access itself. A public road provides a guaranteed route to your property at all times. But when private roads are involved, the situation becomes trickier. If your land is landlocked, the usual solution is to arrange an easement with a neighboring property owner, giving you the legal right to access their land via a private road. We'll go into more detail on this in the next section.

4: Easements

Easements take us into the realm of property law. As defined by Merriam-Webster, an easement is "an interest in land owned by another that entitles its holder to a specific limited use or enjoyment" [source: Merriam-Webster]. Picture yourself finding the perfect plot of land—lush, full of trees, a gentle stream, and a beautiful open space ideal for your dream home. There’s just one issue: no public road provides access, and the only way in is a private road owned by your future neighbor. That’s when easements come into play.

With a bit of luck, you might be able to negotiate an easement with your neighbor through friendly conversation. The specifics of your easement will depend on the situation. For instance, you might need to run a power line across a corner of their land or even want to build a driveway that leads to their private road.

Generally, it’s wise to consult a real estate lawyer when negotiating easements. Even if you have a good relationship with your neighbor, formalizing the agreement in writing will help clarify the terms and safeguard you from potential liabilities [source: Schleiffarth]. If your neighbor isn’t open to the idea of an easement, things could get complicated. You might need to take legal action to establish a "way of necessity," which would require proving in court that you need the easement for access. Alternatively, you could argue for an easement based on prior use if it's clear that previous owners accessed your neighbor’s land before you bought yours [source: VacantLandInfo]. When legal matters are involved, it’s crucial to hire a real estate lawyer to navigate the process.

3: Surveying

At last, we return to the subject of surveying, which we previously touched upon as a fundamental cost when buying a lot. When reviewing property lines on a map (often referred to as a plat in real estate), it may not be immediately clear how those boundaries correspond to the actual land. This is where surveying plays an essential role.

Certified surveyors examine your property and utilize a plat to find and mark the precise boundaries of your lot. When considering the purchase of a property, there might be an existing survey. You may notice survey markers on the land indicating the corners of the property. You could even come across survey documentation when you check the property’s paperwork.

Even if a previous survey has been conducted, it may no longer be up to date. Getting a fresh survey will provide a clear delineation of your property line, which is especially critical when dealing with legal matters such as easements. Surveys also have other uses beyond just outlining property boundaries.

For instance, a construction survey is useful for accurately determining elevation and planning the dimensions of a home. Additionally, floodplain surveys (which will be covered in more detail soon) provide vital information regarding the potential for flooding on your lot.

The price of a survey depends on various factors: the size of your property, the time needed to complete the survey, and the amount of research the surveyor must conduct with the plats. Naturally, the type of survey also plays a role in the cost. While a floodplain survey may be more expensive, it’s far less costly than discovering your property is in a flood zone after you’ve begun construction.

2: Flooding

Unless you're purchasing a vacant lot with the intention of transforming it into a flooded disaster zone, flooding is a serious concern. It’s an incredibly destructive force that can completely devastate buildings or cause tens of thousands of dollars in water damage. Does that sound appealing? Not at all.

So, how can you determine if a vacant lot is located within a floodplain? First, check the plats. Previous research might have already mapped out the land's elevation and highlighted potential flood-prone areas. If not, you can always consult a surveyor for assistance. FEMA flood zones are clearly marked with letter designations. Flood Zone A indicates a 1 percent annual flooding risk, requiring flood insurance for any construction. Zones X or C are the best ratings, as these areas have less than a 0.2 percent chance of annual flooding [source: FEMA].

Once you've confirmed that your future home won’t be submerged during the next major storm, there’s just one final obstacle to overcome before you can officially claim your new property: the bureaucracy.

1: Building Permits

It’s an unfortunate truth in real estate: almost everything you build will require a building permit. Before construction can begin, you'll have to navigate through government zoning regulations, and secure permits for everything from building to burning, and the list goes on. While it can be a hassle, permits aren’t necessarily a bad thing. They actually protect you from your neighbor’s bad habits, even as they impose restrictions on you. Construction permits safeguard the land and ensure you follow building codes, which prevent you from constructing a shaky structure that could easily collapse.

Prepare for a continual stream of permit applications as construction moves forward. Need to drill a well for water? You’ll need a permit. Installing a septic system for waste management? You’ll need a permit. The construction process is filled with permit requirements, from plumbing to electrical work. On the plus side, when all the paperwork is completed, you’ll be left with a solid, fully legal investment. But first, you’ll need to find that ideal piece of land. Time to start your search.