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By now you know that The Reserve on the Saluda offers a unique opportunity to purchase waterfront property in a secure, gated, riverfront community in West Columbia. Having the perfect piece of property to build a home on is a dream for many folks, but why buy land instead of purchasing an existing home? The land will need to be perfect and you'll want to have a plan to build your home. If you are in the market to buy undeveloped land — or just intrigued by the prospect — let’s break down what you need to know, whether it’s for investment or for homeownership.
What is undeveloped land?
Undeveloped land, also known as raw land, is a piece of property that is empty and devoid of man-made improvements. That means it comes as nature built it: no electricity or sewer hookups, no buildings, no man-made facilities or resources.
What are the advantages of buying undeveloped land?
There are many advantages to buying undeveloped land.
- Cost. In general, undeveloped or raw land will be far less expensive than real estate (that is, land that already has structures and infrastructure on it). With raw land, you’re buying just that: land. With a developed property, you’re paying for the land plus all the improvements, and the home on it may not be what you want.
- Flexibility. You have many more options for how you’ll use the land. If you buy a developed property, unless you want to spend even more money demolishing the existing structures, how you use the property is locked-in. With undeveloped land, you can build whatever sort of structure you’d like or use the land for almost any purpose, so long as it meets local zoning requirements.
- Less competition. There are generally fewer people who are interested in purchasing empty land than people who want to buy developed properties. That means there’s a good chance you’ll face much less competition when you put in offers.
- Grant and loan opportunities. Many undeveloped lots are in rural areas. Depending on where you buy, you may be able to get a low-interest loan or grant from one of the USDA’s programs to help people purchase and develop land.
What are the drawbacks of buying undeveloped land?
Buying undeveloped land offers a few challenges.
- Cost to develop. While the land itself might be cheaper than developed real estate, you’ll have to pay all the associated costs of developing that land. You may need to pay your local municipality to extend sewer, water and electricity services. The average cost to construct a home will be added on top of the land purchase.
- Difficult financing. Securing financing for a raw land purchase might be more difficult than borrowing money for a typical existing-home purchase. You also may have to provide a larger down payment.
How do you finance a land purchase?
When you buy real estate, you’ll typically finance it with a mortgage. However, purchasing raw land is different. It usually requires a special type of mortgage, often called a land loan or land financing.
A land loan usually has stricter requirements than a typical mortgage. You’ll usually need strong credit, a big down payment of the purchase price, vs 20 percent for conventional mortgages— and may even need to provide another piece of property as collateral.
This is because raw land is riskier for the lender than a developed property. If you miss payments and the lender forecloses, it will be harder for the lender to sell the land and recoup its investment.
Having a specific plan for how you’ll use the land can often make it easier to secure financing. Lenders like to see a plan for developing the property you hope to buy.
Other financing options
If you already own a residence, you can also consider using a home equity loan to get the funds to buy the undeveloped land. If the property is relatively inexpensive, you might be able to use something like a personal loan to finance the purchase.
The land loan is only to buy the property itself. If you want to build on it, you’ll have to seek out additional financing, such as home construction loan.
We're proud this beautiful gift from nature that is The Reserve On The Saluda. Our community’s central location is a major draw for successful professionals who’d like to enjoy easy access to the city but, at the same time, wish to live in a more secluded, natural setting. The Reserve On The Saluda is an oasis where the sounds of a bustling city are replaced by birdsong the river rushing by. If you'd like a tour of our community, please contact us on the form below.
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