Become a FREE member now and list your properties for FREE!

How to Buy Raw Land

The following 12 steps will aid you in the quest to purchase raw land. All of the information needed to accomplish these 12 steps comes from your local community. You will find that a local real estate agent can be very helpful in providing much if not all of the basic data; however, it is highly recommended that you get involved by attending city & county council meetings and other public meetings that deal with your community and the real estate in it. The idea is to become an insider in the market, and the only way to do that is to meet with other insiders until you become one of them.

The 12 Steps to Buying Raw Land

Review each of these steps and put them into the context of your own situation. You may have already taken care of some of the steps without really knowing it, and once you see the whole picture you will begin to see how everything fits together.

1. Plot Growth Trends. Start with a map of the area and go to the county planning office. Ask one of the senior planners to help you plot out the business, industrial, and residential growth of the community over the past 30 years (more or less). The idea is to see how areas have grown and where the upper-income areas of town have established themselves. These are the primary areas where you want to focus your attention.
2. Understand Zoning Regulations. Zoning rules and regulations are the most important of all the local restrictions that control use and therefore value. Visit each of the different zoning offices that govern land in the area you are researching. This may require visiting more than one city, and a county office for unincorporated land areas. Get copies of the zoning ordinances and read through them. Make sure you understand each classification of zoning and the differences among the different communities.
3. Recognize Use Zones.  Areas of a community often develop into use zones. Downtown areas, for example, may become mostly office use, with little or no residential activity, even though the zoning may allow it. Suburb areas may be overly heavy in single family homes with little apartment or commercial use even though the zoning may allow it. Theses patterns may indicate possible profit centers if you can take advantage of an allowable use in an area that is light on that use. The key is to understand why an area was developed for the particular use that exists, even though the zoning of the area was flexible and permitted other uses. You may find that historically the area went through a change, such as a city center area that became so commercialized that residents moved out to the suburbs, and where apartment building were slowly torn down and replaced by higher rent office buildings. Sometimes these areas can and should revert back to mixed use to create live-in city centers.
4. Classify Areas Demographically. Code your areas to the demographics of the community. Some residential areas will cater to a higher income level property owner than others. When you see growth moving outward from one of these areas you might assume that the demographics of the new area will be equally high or even higher. However, do not assume this without examination of all other factors. The key to good information is to cross-check the data with several different sources. The tax assessor’s office can give you information based on property values, whereas the telephone company will have areas broken up into demographics of phone bill charges. The American Express Credit card company segments zip codes into areas as well. By selecting several sources, you end up with a better picture.
5. Isolate Target Areas. You need to limit the area of your research as quickly as possible or you will be frustrated in the monumental task of finding the right property to acquire. Try to stick to one set of governmental controls by staying within one city and county rather than several different ones. The key to selection of a target area is to have a general idea of all the possible optional areas first.
6. Attend Planning Meetings. Once you know which city and county you plan to invest in, start going to the planning and council meetings. The insiders attend these meetings, and to become one of the insiders you need to attend them too. You will learn more about your own community in 2 visits than you ever thought possible, both good and bad. Be sure to make notes of all the people you want to meet personally. Start with the mayor and work down. The key to attending public meetings is to obtain an agenda, understand the procedures of the meeting, make notes of the VIPs at the meeting, and take steps to meet them.
7. Get to Know DOT officials. The officials of the local departments of transportation (DOT) are very important because these 3 departments, state, county, and local, will have the greatest available data on potential property value changes. These departments are found at 3 levels (state, county, and city); each is critical and each will have a long-range master plan that is available to you. While these master plans are subject to (and frequently do) change, they will provide you with a “reliable” forecasting tool showing areas that will experience improved traffic flow or become open to new traffic. The key to getting to know any official is to maintain contact with the person to ensure that they get to know you. This is a primary step in becoming an insider—the fact that local VIPs recognize you as someone also on the inside.
8. Obtain Utility Expansion Plans. The local water, sewer plant, city gas, electric service, cable television, telephone company, and other public works each have a master plan and timetable to ensure that they are ahead of the growth patterns. Because it is difficult to build homes in areas where there is no electricity, the electric company would be the first place to start.
9. The demand levels of their service that each of the above utilities expect for the future from the different areas of the county or state would be highly useful information for any real estate investor and absolutely indispensable information for the vacant land speculator. The key to obtaining data from utility companies is to request the information in such a way that it appears to have already been offered. For example, contact an official in the company: get the name of one of the top officials, say, the director or the president. Call that person and ask them who would be the best individual to talk to about public relations information and other data that would be helpful for a report you are compiling. Then call the public relations person and tell him or her that the president of the company (or whomever you talked to) asked you to call him or her about the demographic and planning data.
10. Review Historic Examples of Similar Growth. Go back to the first step and take a look at the patterns of growth you plotted out. How did the growth occur and what were the results? If you know there is a new airport planned for an area that is nothing but farmland now, then look around and find a community not too far away that had that same event 10-20 years ago. Look at how its growth evolved and the change in land values. Be sure to make adjustments for price levels and be aware that some of the mistakes that happened before just might happen again. The key to getting useful historical information is to make every effort to find past events that are as similar as possible to the situation you are studying. This is often very hard to do and may be one of the most difficult of the 12 steps to complete satisfactorily.
11. Maintain Contacts with Lenders. It is important for you to know what situations appeal to the lenders and what they will loan money on. Even though you might not be a developer and are only looking at a tract of land as a speculator, you will find that the more you know about the problems a developer goes through, the better you will be at selecting the right property in the first place. Smart developers build what they can finance. The key to dealing with lenders is that they get to know you as an insider who is or may become a prospect for them in the future. This requires you to introduce yourself as a real estate investor looking at the local market to determine if it is a good place for you to invest in. As a potential client, the mortgage broker or banker will supply you with more information that he or she would otherwise.
12. Learn How to Rezone Property. The ultimate and maximum profit you get from a vacant tract of land may come only after you change the zoning to a different use. Because value is a function of use, you should begin to become aware of all the steps necessary to effect a zoning change. To accomplish this, you should first make an inquiry at the zoning office about the necessary paperwork. The 2nd step will be to attend several rezoning meetings to get first-hand information about how the professionals do their job. It is both interesting and highly informative. You will meet the people in town that specialize in rezoning and will quickly spot those who are more adept at that task than others. The key to rezoning is to know what “new zoning” is likely to produce an economic conversion of the property to your benefit.
13. Prepare Your Investment Team. Your team should include all your partners (your spouse being the most important), a real estate lawyer, a good tax advisor (lawyer or CPA), and one or more real estate agents. All the members should know your goals and be committed to helping you attain them. The key to forming an investment team is to shop around. Find and use people who are compatible with your needs and who understand that you expect them to assist you in the attainment of your goals.