Buying land: considerations.
If you find yourself considering buying land, here are some considerations to have in mind.
Here is a detailed list and a short explanation for each:
Price is what you pay, value is what you get. Just like when buying a car, it is important to have an idea of what you are willing to spend and what you should expect to get in return. Land is usually priced with comparable sales: this method takes into consideration:
Location- on a map, where are similar sized, shaped and quality of land located, and what did they sell for?
Similar parcels- Are other neighboring parcels for sale or sold nearby?
Defects/ Issues- did someone dump tires, oil, waste, etc on the land (are there environmental hazards?
Improvements- is there a well, driveway, power nearby? (Did someone spend money to increase the value?)
Access- is there clear road access where a drive could be or is in place?
Easements- Do you have to travel on someone else’s land to access? OR Does someone have an easement across the land you are looking to purchase?
Temporal aspects (time)- Is the economy terrible? Sometimes value fluctuates up or down based on the seller’s financial situation (job loss, divorce, death, etc).
How to get a good price when purchasing land?
Buy what others do not want to buy (limited buyer pool situation)
Buy when others do not want to buy (bad economic time)
Buy to improve (install a driveway, manage the forest, clear trees, install power/ building/ house)
Buy to subdivide (take a pie and cut it up, sell the pieces)
TIP: It never hurts to look, who knows, you may find a screaming deal the first day you begin looking. It can never hurt to start looking a head of time to follow the market trends, experience the seasonal differential and best scope out the market.
Buy with cash. As the old saying goes: the borrower is slave to the lender does ring true. If you are a fan of cash, this can be helpful to purchase land. Anytime you use a loan, the purchase price and the price you pay will be different, because in addition to the purchase price, you will also pay lender fees and interest. With cash, you negate these additional costs which decreases what you pay to acquire the land. Cash land sales can sell for less compared to a loan, because land loans can be difficult to get, they can take longer, and there is a decreased level of certainty.
Pros: You control the money, you may get a better price, you can buy quicker.
Cons: You will decrease your liquidity
TIP: If you expect to use cash to buy land, make sure it is liquid (in a dispensable bank account such as savings or checking). Sometimes certified deposit (CDs), money markets, and high yield savings accounts have penalties due upon withdraw. Contact the institution. Also if you have precious metals, stocks, or interest in a business for example, it is recommend to consult a tax professional to determine if liquidation will result in taxation- decreasing your raw purchasing power.
Buy with a loan. Lot/Land loans or construction loans (if you intend to build) can be an attractive option. Because you will use the lender’s money, you will be bound by their rules and fees. Typically, lenders will require a down payment of 10% -20% for vacant land. This is much higher compared to a home loan (typical 1%-20%) because lenders see land as a higher risk compared to a home. Additionally, the lender will usually want the loan to be amortized over 10-20 years for land compared to 15-30 for a home.
Pros: Leverage capital
Cons: Terms, conditions, fees, interest
TIP: You can call local banks and ask them if they have land/lot/vacant land loans, but we recommend calling the bank you currently use as a first step, because they may have local referral lenders who do land, or they may originate land loans- and they already have you as a customer and know your situation.
Your use. What are you going to use the land for? Ensuring the land will work for your use is important before you buy it.
Hunting: can you hunt on the land?
Build a home: are there restrictions such as deed restrictions, county zoning laws or setbacks?
Wetlands: will flood insurance be required if you build, or will a surveyor need to preform a LOMA to remove the land from flood plain?
Soils: will the soil support any structures you intend to build? Will the soil support a septic (if applicable)?
Wells: can you drill a well, is city/municipal domestic water available?
TIP: A good first step if and when you locate a piece of land you are considering purchasing is to call the county. They can provide information on zoning, taxes, assessments, references to contractors, etc.
Taxes/ fees. In the US, real property tax is how almost all local governments acquire capital to pay for municipal services. Tax is due each year, and is calculated based on the mill rate and assessed value. If you buy a piece of land and build a house, expect the tax to increase. Land cannot be moved, so you will be subject to reassessment and any changes in tax rate. Special assessments- lake assessment, sidewalk, etc. may be surcharges you will be responsible for.
Boundaries. Are there areas of neighbor encroachment, is there a plat map or survey? Are there survey markers in place, or will a new survey be required to build?
Hunting/ wildlife. There are detailed maps of species and their geographic range found on US Fish and game, DNR and wildlife groups. If you are shooting a gun, you want to make sure you have adequate backstops. Some places do not allow gun discharge (ie hunting/ target shooting).
Waterfront. If you buy on water, there will be additional challenges if decide to build: setbacks, docks/pier rules, water elevation fluctuation, erosion to name a few.
Geographic features. Wisconsin is interesting in respects to the geographic features it has. The Pleistocene ice sheets, caused lobes to form and flattened much of the state.
The regions, Western Upland, Central Plains, Eastern Ridges, Northern Highland) all have discrete features.
The soils, Clay, Sand, Silt, Loam and Peat can be found throughout the state varied by area.
Some areas have rock which makes digging (basements, power, waste water) difficult.
Forests. If you buy in a forest ecosystem, trees can be problematic. Wisconsin has a managed forest law which allows land owners to partner with the WDNR to manage the forest. If you manage the forest yourself, be mindful of the tree species, fungi and insect pests, tree disease and dead fall. Trees fall. They may block your road, fall on structures or fall on your power lines.
Utilities. In the modern world, electrical power is taken for granted in modern life. Most of Wisconsin is serviced by private power companies in rural settings. There are locations that do not have power available.
Electrical Power: Search for buried power or overhead lines- often there are tags with the service provider’s contact info. You may also find internet searches for an area yielding service providers. There is often a given distance from the road (150’ for example) the service company will go to install a power source or meter.
Natural Gas- there are pipelines and branches in cities and towns, but outside of these areas, expect to use propane. This utility can be found by using the same methods described in ‘Electrical Power’ above.
Propane- C3H8 is a specific natural gas used to heat homes. It is stored onsite in metal tanks and filled periodically.
Internet/Landline- There are areas with fiber internet throughout the state, but satellite internet (starlink) is popular for it’s speed and connectivity in remote locations. This utility, if applicable, can be found by using the same methods described in ‘Electrical Power’ above.
Phone- areas of the state have very stable cell phone reception. There are dead spots up North and in some hills/ remote areas.
TV: Cable or satellite are common. This utility, if applicable, can be found by using the same methods described in ‘Electrical Power’ above.
Natural Disasters. Wisconsin is classified as a warm-summer humid continental climate. There are four distinct seasons: cold winters with prolonged snow cover, spring, and hot humid summers.
Drought- possible/common- prolonged duration with limited precipitation increasing risk of wild land fire, poor crop.
Flooding- possible/common- flash floods overloaded storm drains, spring melt, river flood.
Freeze-possible/common- prolonged cold spells.
Blizzard- possible- extreme wind, interrupted power, cold snowfall and limited visibility.
Tornado/ Severe storm- occasional storms from the great plains.
Proximity to Parks/ Water. Wisconsin has over 10,000 lakes, state parks and local parks. There are specialty parks like gun ranges, Frisbee parks, walking trails and wild land parks. Lakes often have public access points.
This is a detailed list of things to consider when buying land we have compiled. Questions/ comments can be directed to our contact page.