Buying property is one of the most effective ways to accumulate long-term wealth. Whether you’re buying a home or buying land, both are limited assets that appreciate over time. However, while buying land and buying a home are both considered real estate transactions, they are very different processes and investments. Buying land is far less common, so it’s wise to familiarize yourself with the nuances of this investment and how you can mitigate risk in the long term. Here are some of the major differences:
Evaluating Land Is Different Than Evaluating A Home
Evaluating land quality is very different than evaluating a home’s quality. You’ll need to start by thinking about how well the property aligns with your future vision.
Depending on what you plan to do with the land, the size of the property, the quality of the soil, the type of wildlife, construction feasibility, access to utilities, and zoning restrictions are all important factors to consider.
Where you can easily assess a home with a visual walk through and a few inspections, evaluating land takes more time and often requires a wide range of professionals and analysis. It’s important to partner with a land expert when searching for and evaluating properties. A land expert likely has a network of professional connections, such as engineers and developers, who can help you assess your property.
Land Maintenance Is Easier Than Home Maintenance
Owning land is easier than owning a home because a lot less can go wrong. However, that doesn’t mean you can buy land and completely ignore it. Depending on the location, you might need to perform minor landscaping, but you won’t need to worry about remodels, repairs, and other costs associated with homeownership.
Financing A Land Purchase Is More Difficult
Financing a home purchase is easier than financing a land purchase. The approval criteria for a mortgage is less restrictive than a land loan, and mortgages offer lower rates and lower down payment options. Mortgages also offer 30 year terms, where most land loans cap at 15 years. Many large lenders don’t offer land loans because they view them as risky, so you’re usually better-off paying cash upfront if you can.
However, this doesn’t mean you can’t finance a land purchase. Obtaining a land loan is entirely possible, especially if you work with a smaller bank or a farm credit institution. You’ll likely need to provide a detailed business plan on what you intend to do with the land.
You Can Do More With Land Than You Can With A Home
Owning land opens-up a wide range of opportunity for future financial growth. If you’re looking at buying land as an investment, consider the fact that land is highly versatile. You can start many land-based businesses that drive income while also increasing the value of your land. Whether it’s hunting land, a driving range, or storage space — there are many easy business concepts you can start with minimal costs. You can also use the land to build your own home or a rental property that drives profit.
If you’re thinking about buying land in Central Florida, Palmetto Realty can help. We’re specialize in land transactions and we’re pros when it comes to evaluating properties. We can help you find the perfect property that helps you achieve your goals.