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Some potential homeowners want to buy a raw piece of land. Others prefer cleared lots in a subdivision. You need to weigh the pros and cons and decide what fits your lifestyle best.
If ultimate privacy and “not-so-close” neighbors is your preferred way to live, then you should consider buying your own land and building your home there.
Land that is unattached is going to offer you the freedom of doing what you want, where you want. You can buy uncleared land in both rural and urban areas, but you get the most bang for your buck in rural areas.
Some things to be aware of include clearing and grading costs, drainage and soil quality, land slope, and any easements that might need to be put in place to access the property. Don’t forget to enquire about existing electrical and water connections also.
If you need new connections you will need to contact your local power company for electricity and your local county public works for water hookups.
Sometimes, it’s just easier to purchase a lot and be done with it. If you want to be in a subdivision, or a specific location this is the way to go! Simplicity is one of the main benefits to purchasing a lot and that’s why most 1st time homebuyers go this route.
Usually found in new subdivisions, cleared lots are a predetermined size and shape and are ready to build on (sometimes). These lots are usually sold by either land developers or home builders that own the entire subdivision. Some of the lots will be fully cleared, some will be cleared only of large trees, and some are cleared and graded fully.
Cleared lots in highly populated areas and “waterfront” parcels always carry a premium in price compared to less populated areas. Where square footage is in high demand, land price is proportionately more expensive.
“As an example, I was recently looking at an uncleared parcel of land (7.8 acres) located about 20 minutes from our NC beaches for around $70k. Now, moving to a waterfront lot in Emerald Isle, NC we find a 0.56 acre cleared lot with a price tag of $700k! Yes you read that right, a little over a half acre.”
Your lot's topography strongly influences your building costs. If you want to build on the edge of a cliff, it's going to cost more!
It’s time to talk about the slope of your potential lot or land purchase and how it affects how and what you can build, and how much more it’s going to cost you to build there.
Slope. The amount of rise or fall in elevation. For most building projects, a more level or gently sloping lot is best and usually the cheapest. This of course is dependent upon what you are trying to build. If you want a basement in your home, it would be best if you can find a lot that has a big elevation change. This will make it a natural fit for a home with a basement.
For typical crawlspace foundations, the desired slope would be gradually sloping or flat. The more slope you have, the taller your walls will be and more masonry material and labor you need to budget for. I’ve seen full sized entry doors installed on the rear as an access entry! That’s a tall back wall.
The region you live in dictates what types of land topography exists, generally speaking. Homebuilders in Colorado understand the nuances of building on the side of a mountain, whereas a homebuilder in Florida probably wouldn’t have to deal with that much or ever.
I would recommend you work with someone that is familiar with the local soils, local building codes, and local building conventions. If and when problems arise, these will be the guys (or girls) that you want on your job site solving your problems.
Minute changes in the scope of your project can blow your budget up. Keep all aspects of your projects organized. This will make budgeting and maintaining it much, much easier.
This is where most people need help when it comes to planning a successful home build. Things you need to consider when picking your home lot and deciding on the budget include: a land to home value as a percentage, know your income to mortgage ratio (shouldn’t exceed 33%), if you have a down payment (how much), and watching current lending interest rates.
Land to home value is pretty easy to calculate. Simply divide your lot/land price by the total value of home and lot. LOT PRICE / (LOT + HOME). An example: $35k / ($35k + $200k) = 15%. Most homes probably average around a 25/75 split or 25%.
Income to mortgage calculates how much of your income is being paid to your mortgage. A quick example I can give you is this: Person A makes $75,000 per year and the mortgage for the house is $2,000 monthly.
Your monthly income is (income divided by 12 months) or $6,250 pre-tax income. With your monthly income and your monthly mortgage payment, you can find out what percentage that deal would be.
Divide your mortgage into your income ($2k/$6.25k = 32%)
Most banks will not sign off on a mortgage loan if you are over 33% income to mortgage. It’s too risky for them and for you. On the extreme end, just imagine if you used 65% of your total monthly income to pay your mortgage payment. It would be really difficult to pay the bills and eat!
The average down payment on a home being built currently is about 12% of the total purchase price. Younger homeowners tend to pay much less on their down payment, averaging around 6% and sometimes nothing at all.
Obviously, this is because younger people tend to earn less. The age group that pays the largest percentage down payment are 66-74 year olds with 23%.
An individual inspection of the data shows that there is a huge range of down payments and the amount depends on numerous factors. Wealthier people can just pay 100% of the costs upfront and enjoy the feeling of not having a payment.
You should definitely do some soul searching to find out what you want and don't want when purchasing a parcel of land.
This paragraph is dedicated to you (the reader), to give you a list of things that you should consider before you buy land to build on. The first thing you should decide is whether you want to live inside of city limits or outside of city limits. They are very different choices, but it’s a great place to start.
If you decided that you want to live inside city limits, that’s great news! The following items are important to consider. Zoning restrictions are laws that specify what you can and can’t do on a specific piece of property. When building a home, you want to purchase land zoned as “residential.”
Trash pickup, water services, sewer, electrical hookups, internet access are all typically always available inside city limits.
Be aware of HOA’s, building requirements, and ordinances that are put in place. Make sure you ask about the parking situation as well.
Finally, permitting inside city limits is always more tedious, more difficult, and takes WAY too long. Big city permitting departments have way more permits to process and typically means that you will be waiting longer for approval.
For all you peace seekers out there, country life is your choice. You have more freedoms in rural areas, in regards to what you build and what you can do. You still need to find out what your zoning restrictions are. A majority of rural land is used for agricultural and timber growing purposes.
Most often you will need to contact the power company that serves your area and get them to come out and extend their line to your lot and install whatever hookups necessary for you to have electricity.
You will also need to either have a well dug for your water or hook up to a local county water connection if it’s available.
If you are on road front property, this will all be cheaper and easier. If you are 800ft off of the road, you are going to have to pay the upcharges for the extra work involved in extending electrical power to your lot.
As far as internet / tv services go you will have to check to see what providers are servicing your area (if there are any). Sometimes this can be difficult and discouraging, especially for people who are content creators, remote workers, and others who rely on an internet connection to be able to do their job or live their lifestyle.
Do your research. Visit the lot on a Friday afternoon around 5pm and see what the traffic is like. If you can, go by after a huge rain storm and see how effectively the lot will drain away storm runoff. Nobody wants a swampy yard!
All of these things are “insurances” to protect you from the nightmare of buying the wrong lot and having to live there.
No matter the lot you end up choosing, make sure it fits your lifestyle, your budget, and fulfills your needs. Remember to think of all the people that will be living there and what their individual needs are and plan as a group.