Thursday, July 8, 2021

Finding, Vetting and Financing Vacant Land

 Finding, Vetting and Financing Vacant Land

Finding a dream home that meets all your needs sometimes can be hard to find. Maybe you find a home that meets basic needs. However, it doesn’t have a garage or a swimming pool space. This and many other reasons could make you consider looking for vacant land to buy and build your dream house with all the facilities you need.

Unlike house buying, vacant land buying has its unique features. For instance, vacant land cannot access mortgage loans like a ready-to-occupy house which financial institutions allow.

Reuben Kimani, CEO Username Investment Limited, advises aspiring landowners to consider working with reputable and trusted real estate agents or companies when searching for a perfect piece of land.

Here is a guide on how to find and finance your next parcel of land

Finding a piece of land

Before your starting looking for the piece of land to buy you need to have a clear intention of your land. This will work as a guide on what kind of land and the location where you should be searching at.

Are you looking for a piece of land to build a house to be your primary residence or you want to expand your farming activities or do you want a warehouse? Having this kind of information will help you to search for a perfect land faster and easier.

One common thing that you need to understand when searching for a piece of land is land zoning. This will determine the facility that you will develop in the property after purchasing your new land. By law, Land zoning has been categorized into residential, commercial, and agricultural zoning.

If you considering building a residential home in zone land for farming, consider inquiring about the cost and time it takes to do rezoning in the location you are planning to acquire the piece of land.

When considering working with a real estate agent, you need to hire the best agent that understands the descriptions of properties of any listed property for sale. This is because the information provided by the seller needs to be interpreted correctly both online and offline.

Another aspect that is important in finding the piece of land is the type of soil. Soil determines the kind of structure to be built on it or the kind of farming to do in the parcel of land. The cost associated with the development of properties on poor soil structures could be expensive.

Vetting the land

In addition to understanding the soil type in the area where the land sites, you need to further do due diligence on the land as this will affect the over price of the land you intend to buy.

Road access to a parcel of land has to be a factor in the checklist as this is very important. Developing a piece of land with a poor road network can delay project development and might necessitate renovating the road to allow building facilities to be transported to the farm. This will cost you more than you had planned.

Electricity connection is another item that you cannot do without. Be it you are building a home or you are running farming activity, having an electricity connection should be taken to consideration. Also, find out the cost of extending the electricity should need to.

Utilities like the sewer system connecting the farm need to be checked. If the land is in rural areas or suburbs of a city, there might be missing. In cases where there is no near line of sewer, how much will you need to set up a private septic tank?

If for whatever reason after purchasing the land and zoning issue comes up, you will need to know in advance the cost of rezoning and efficiency of the approving board.

Another thing you will need to look into is property taxes which often change whenever development is done on vacant land. What you need to check before buying is the existing property tax on the property. The land seller needs to clear any pending taxes before transferring land ownership.

All above mention items need to be accessed properly as it will affect the valuation of the property. Before sending a letter of offer or thinking of getting a loan from a financial institution, the land should be affordable to you.

Financing the land

Financing vacant land is very hard compared to financing ready-to-occupy house. This is because vacant land has a high risk of default. And this is accredited to the fact that it generates no income or does not serve as a primary residence to the landowner.

a) Bank Financing

Banks don’t finance a loan to buy vacant land. However, you can access a loan from your SACCO to finance the purchase of land.

b) Seller Financing

In some cases, land sellers tend to have a private arrangement with their buyers. This is common with real estate company that has developed land for sale. In this arrangement, the title deed of the land remains with the seller till you complete the payment.

C) Home equity Financing

This when you take a loan to purchase a new land using home loan equity of one of your existing homes. The downside with this kind of financing is that you risk losing your home if you default to pay the loan.

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