The Stages of Land Development: Understanding the Investment in Land for Sale

The Stages of Land Development: Understanding the Investment in Land for Sale

The Stages of Land Development: Understanding the Investment in Land for Sale
New investors often believe that any vacant land for sale will be a sound choice. After all, land can be built up, buildings or homes can be put up, and a lot of money can be made – right? Well, the answer is not that simple. While cheap land for sale may be tempting, there is a very strict development process that needs to take place before a shovel even hits the ground.

Researching the Land

Before purchasing land, you must fully understand the potential and problems of the land itself. Not only will you have to consider the local community, but you will need to consider the state of the land. If the land is not close to electrical lines or water lines, this will be an investment that adds to the overall cost of the acquisition.

Land may also not be suitable for building in its current state. For instance, land may be considered swampland wherein immense work must be done before any buildings can be constructed.

This same level of research may not need to be done with buildable lots for sale that have already had a thorough survey of the land done.

Before acquiring land, you will need to know how much further investments will be needed to bring the land to a buildable state and what can be done concerning utility lines.

Land Possibilities

Land can be purchased for residential or commercial building. In the latter case, there will need to be a lot of due diligence done and a land developer will need to determine a path of growth. As an investor, you will need to understand the potential of the land you have or are ready to acquire. This can be done by researching:

  • Economic projections for the city

  • The needs of the city

  • Competition levels

  • Potential job and population growth

The more due diligence that can be done on vacant land for sale, the easier it will be to begin the building process.

Drafting Stages

Plans for a buildable lot will need to be drafted so that the land’s purpose is described fully. The drafting stages will draw up plans that will show how the land will look after development. This will outline:

  • Communities

  • Shopping centers

  • Parks

Virtually anything that will be added to the raw land will be included within the draft. This does not include the actual blueprints of buildings, but simply a drafting stage that is needed to be sent to government agencies to proceed on to the Entitlement Process.

Development Approval

The Entitlement Process enables the development process to go much faster and smoother. The process will include the following:

  • Securing all of the legal permits and approvals to develop the land

  • Pushing the land into the “entitled” stage wherein building can commence

  • Allow for water and utilities to be acquired as the land is now ready to be built up

Development approval must be given before the land can be developed and can be a very lengthy process that takes 3 – 12 months in some cases. For larger commercial projects, this approval may be hastened with the help of a law firm.

The Entitlement Process will occur in three stages: Code review, approval review and the application of regulations.

The goal is to be able to start your project on-time, and this can only be achieved by starting the Entitlement Process as early as possible. This will allow your home or commercial space to be approved on-time and within your budget.

Buildable Lots

If you are purchasing one of the many buildable lots for sale, you must still do your due diligence to make sure that the lot is considered buildable for your needs. First and foremost, not all lots are buildable, and this may need to be considered.

If a lot is deemed buildable, it may not have been approved for the scope of your desired home or building. A lot will be approved based on specific plans. A lot that was approved for a 2 bedroom home may not be approved for a 3 bedroom home. You will need to get reapproved if you intend to build on the lot and your desired structure does not meet the approved description.

Disclosure Laws

Depending on where the land is located, there may be disclosure laws in place that require the seller to alert the buyer, in this case you, of any known problems or defects found on the land. There are two types of defects or problems that will be a concern:

  • Material defects: These are defects that would cause the value of the property to be lower than the selling price. These defects must be disclosed in most states, but it is up to the buyer of the land to do their own analysis of the land to ensure it is defect-free.

  • Environmental: Problems can arise from buried substances on the land. If items, such as toxic materials, were buried on the land, you would inherit the responsibility of cleaning up these problems and be held liable for any injuries they may have caused as well as fines where applicable.

Disclosure laws and agreements can help safeguard your interest when buying a lot. A lawyer will be able to alert you of the best practices to follow in regards to disclosure laws and safeguards.

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