Pros and Cons of Buying Vacant Land

When looking to purchase real property, there are two main options: buy an existing home, or buy vacant land and develop it yourself. While the majority of people are interested in buying an existing home, vacant land can be a great option for some. Below I’ll share our pros and cons of buying vacant land.

What is vacant land?

Before we get into the pros and cons of buying vacant land, let’s explain what we’re talking about for those who might not know. Vacant land, also known as undeveloped or raw land, is property with no dwellings or improvements. Sometimes vacant land will have some existing improvements. Most often, however, things like utilities, driveway, and building pad will have to be established once purchased.

So, is vacant land right for you? Below I’ll share the pros and cons of buying vacant land.

Pros of Buying Vacant Land

Stable investment

When the housing market went wild and prices skyrocketed, land prices (at least where we live) stayed relatively consistent. In fact, we got a better deal on our property than what it was listed for in 2016. While home prices fluctuate quite a bit (especially recently), land prices aren’t usually as volatile. In my opinion, this makes land a stable investment.

Don’t get me wrong, land prices do increase over time – but more so in the long run. In the short term under most circumstances, you can get your money back if you decide to sell your land. Just don’t expect to make much more than you bought it for if you haven’t made any improvements.

Unlimited potential

When you buy a home, you can do a lot of improvements, but you are limited by what is already there and how much space you have. With vacant land, you have a clean slate to do virtually whatever you want! There are basic boundaries, such as the size of the parcel, zoning, and waterways. However, there is a lot more potential to do things your way than with a developed property. That leads us in to our next point.

You get to do it your way

When you buy vacant land, not only is there virtually unlimited potential, but you also get to choose exactly how you want to develop it! You get to decide the layout of the property, where to place your home, barn or shop, how you want those buildings to look, and more! Obviously, there are some aspects of a property that you can’t change. For example, some acreage is better suited as pasture, while other areas might have great views for your home.

However, you do have the opportunity to really take advantage of what is best suited to your tastes and purposes. With a pre-existing home and developed acreage, a lot of that is already decided for you. A lot of folks see this as an advantage, but if you have big plans like we do, it’s more of a downfall. We love the blank slate just waiting to bring our ideas to life!

Cheaper

Perhaps the most obvious perk of buying vacant land over a home is the fact that it is, most often, considerably less expensive. Instead of taking on a big mortgage right out of the gate (and still having things you’d like to change about the place), buying vacant land allows you to dip your toes in first.

There usually is quite a bit of work you can do on vacant land before you dive in to the more expensive endeavors. Doing what you can with what you have, at least at first, allows you to get to know the property and get your plans nailed down before you take action. That way, when you do take on the more expensive projects, you know exactly what you want.

Also, there’s something to be said about taking things a little slower. Doing things one step at a time has allowed us to evaluate what is working great, and what we can do to improve. For example, drainage has been a big one for us. It’s been quite beneficial to see how the driveway and building pad hold up during winter storms, where the water is running, and how we can improve drainage. If we built right away, we wouldn’t have had the opportunity to evaluate beforehand, and little drainage issues could turn into a big hassle.

Now that we’ve covered some of the benefits of buying vacant land, let’s explore some of the drawbacks.

Cons of Buying Vacant Land

Financing can be difficult

There are a lot more options in the mortgage market for buying homes than there are for buying property. Because of this, it’s usually a much more straightforward process to get a loan for a home. Also, since there are so many options, you can get a loan with a lower down payment – some loans even offer 0% down!

For property, there are still some options, it’s just not as accessible for some folks due to the larger down payment requirements. The main options for financing vacant land are construction loan financing, private/hard money loan, or seller financing (owner carry). Banks don’t loan on vacant land alone, so the only way to get a bank loan would be to bundle it into a construction loan. That option would only work if you were planning on building right away, however.

Some owners are open to seller financing and flexible terms, so depending on the property, that could be a great option. Private financing or hard money loans usually have pretty high interest rates, but could be worth checking into.

A lot of work

Let’s face it, buying vacant land and developing it yourself is A LOT of work. A lot of decision making, a lot of trial and error, a lot of blood, sweat, and tears. However, if you have a clear vision; a specific goal with a certain property, I’d say it’s definitely worth the work. Every little step forward in your property development feels like a huge victory when you have a specific vision. It’s motivating to see progress, no matter how small.

On the other hand, developing property is not for everyone. If you’re not really sure what you want, you’re not all that excited about the piece of property you’re looking at, or the thought of development just feels way too overwhelming, maybe vacant land is not for you. Some people do better purchasing a developed property (even a fixer upper) so they’re not starting from scratch.

It’s important to remember, however, that any property is probably going to require some work to get it where you want it. Don’t give up when things get tough. Just because there are bumps in the road doesn’t mean it’s not meant to be (reminding myself of this constantly)!

Takes longer

Developing land is a considerable time commitment, and there’s some delayed gratification involved. Buying an existing home is basically instant compared to starting from scratch and building yourself. Building a home can take several months to several years, depending on how much of it you are building yourself.

Not to mention all the steps that take place before breaking ground. Establishing a water supply, waste management, driveway, house pad, and more. If you’re planning on developing vacant land, you should have a solid long-term vision, as well as several short-term goals.

The unknown

When it comes to vacant land, perhaps the biggest drawback for most is the fear of the unknown. And there are a lot of unknowns when it comes to vacant land. If you’ve ever drilled a well, for example, you understand how risky the unknown can be. After all, you have to pay for the well whether it produces abundant, clean water or none at all. There’s no sure way to know beforehand, either.  

There’s risk in basically every step of property development. Risk that it might not go as planned, risk that it might not even be possible, or on the bright side, risk that it might just turn out better than you could have imagined. The unknowns of buying vacant land aren’t for everyone; but if you are up for the challenge, being persistent and open-minded will serve you every step of the way.  

I hope this was helpful to you in weighing the pros and cons of buying vacant land. While not an exhaustive list, this covers our top reasons for buying raw land, along with some of our biggest challenges. Whether you buy a developed property, or vacant land, I wish you the best on your property development journey.