By Charlie Brown

Perhaps you’ve seen the movie starring a young Tom Hanks – “The Money Pit,” whereby he struggles with the repairs in an old dilapidated mansion that’s falling to pieces. Seems like the perfect deal at first, but only until the staircase starts to collapse and the chimney caves in. There’s an important lesson to be learned here: Never purchase any house (or piece of land) without doing your homework first.

Snapping up some vacant land is not quite the same as buying a house, but the rules are similar – know what it is you’re getting into.

The purchase of a vacant lot is a complex decision, just as is any purchase of real estate. To begin with, you buy a house to live in it, or presumably so anyhow. With a piece of land, you can build your own house, utilize it as a long-term investment, or perhaps set up a business.

Owning land comes with different issues to when buying a house. There may be a variety of restrictions which apply to the lot that’s vacant. In fact, perhaps you can’t even build a house there at all.

Irrespective your intentions, there’s a lot to learn prior to investing in property. Here, we briefly consider a couple of those matters.

It’s much to do about location

This is likely to be the most basic of concerns when purchasing land. If you’re intent on making an investment, then you certainly do not wish to buy a piece of land that comes with little to no resale value.

If you wish to start up in business, you don’t want to be buying land which is completely isolated from any potential customers.

If you’re intentions are to build a house, do not be buying up land that you’re unable to build on.

Prior to investing in a piece of land, develop a generalized concept of where that purchase is going to be. If it’s land for sale in California, use whatever online resources you can to help you, such as Google Maps for starters, then head out for an exploratory drive.

As by way of example, let’s say you want to buy land to then build a house. You’ll perhaps want to consider your job, access to local schools, access to shops, restaurants, hospitals, and so forth.

In other words, you’ll be shopping for the piece of land, but you’ll also be shopping for the local community.

If you wish to buy land for use in a business, this is not going to be quite as easy, given that you need to analyze very carefully the location’s business value. You should of course be thinking about that already.

Understand the Costs

Investing in real estate is an investment of money and time, and the more you invest in preparation, the more you’re likely to be ready to make a wise investment with your money.

What are the kinds of expenses you should expect to incur when purchasing a vacant lot?

You’ll probably need to consider title insurance. Title insurance protects both the owner and the lender against property damage or loss on account of encumbrances, liens, or defects.

You might see this as a form of shielding against a potential legal complication. Though title insurance may not be a requirement, if you apply for a mortgage or bank loan, the financial institution could recommend that you buy title insurance so as to protect their investment as well as your own.

A further potential cost that is worthy of consideration is the land survey. You may not need one. Maybe the land was recently surveyed, and all it takes is a little legwork to find out. But don’t forget about the possible necessity for a land survey.

And then there’s the building and utilities costs which can surely mount up. In some cases, you could have to pay up to get the water and electrical power run to your house even before paying any monthly service fees. Sometimes, there’s a necessity to install a septic system or drill a well alongside the home. If your intent is to buy land as an investment, you can happily bypass many of such headaches.

But irrespective of what kind of land or property you have set your heart on, you’ll wish to know precisely what sort of government zoning restrictions there are in place.

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