4 Things to Know Before Purchasing Development Land

  • 09/24/19

A Guide to The Dos and Don’ts

Buying a home or investing in real estate can be a complicated and lengthy process. From researching locations to working out finances, there are plenty of boxes to check and many resources out there to help prospective buyers out. 

But purchasing land for development is where the waters can get a bit murkier. While some of the principles of buying real estate apply, investing in land is a different ballgame with a host of unique things you should know before beginning the process. Here is your guide to the dos and don’ts.

Do Think Long-Term

While flipping real estate can be a lucrative business with a relatively quick turnaround, the timeline for turning a profit from a land investment is much longer, usually between 10 and 20 years. There can be a lengthy process before you even build. Between zoning and gaining approval from local governments to develop followed by the design process and actual build time, you could end up waiting a decade to see a profit. Therefore, it’s important to keep your timing expectations in check before buying.

Don’t Forget Zoning Restrictions

For this reason, it is also crucial to check into zoning restrictions before you buy to be sure you can do what you have planned with the land once it is in your possession. While underdeveloped land is full of opportunity, it also comes along with risk. To help mitigate these uncertainties, be sure to check into zoning, environmental tests, surveying, water rights, septic system service, and more before you make a final decision on a plot of land. 

Do Research the Neighborhood

One of the perks of purchasing undeveloped land is the ability to build a custom home on it. However, if you are looking to obtain a construction loan, the projected value of the property (the land plus the cost to build) must line up with similar home values in the neighborhood if you want to get approved. A lender is less likely to grant a loan if a home will appear overpriced for the neighborhood, as that will reduce its likelihood of being sold. 

Don’t Do It Alone

Another way to help reduce these risks is to work with an agent who has extensive experience with land deals rather than a traditional real estate agent. Purchasing land comes along with a host of unique details that are not associated with buying a home that is already built. A land-trained pro will be able to help avoid common issues.

Interested in purchasing land for development in Los Angeles? Contact The Fridman Group. We would be happy to provide additional information on development opportunities in the area as well as Bel Air real estate, Calabasas luxury homes for sale, and more.



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