Do you want to acquire a piece of land and build your property with the distribution you want? There are certain factors you must keep in mind before buying land. Let’s find out!
Important Factors to Consider When Buying Land
There are some people who prefer to acquire a piece of land and build their property with the distribution they want. If you are also looking to create a real estate project on a new piece of land, then there are some factors that are taken into account before making the decision to acquire land.
If you have land and are interested in selling it or allying with a partner to invest in a real estate project, Agriculture Mortgages suggested the following factors to take into account before buying land:
Land Use
The proposed real estate project, and its permitted uses, should be in accordance with the price of the transaction.
In the case of development, make sure that the proposed project complies with the permitted land use of the property (surprisingly, there are a significant number of transactions in the market that do not review in detail the compatibility of land uses with the proposed projects when planning to acquire or sell a property).
Market Compatibility
The market rules, regardless of the land use allowed, are very important to understand the vocation of the property, which will be dictated by the market.
Is it land for housing, commerce, offices, or mixed uses? If they are mixed, how much of each component is allowed by the land use and the market support? If you have a vocation solely for housing, what size and price should the units be according to the market (regardless of what the land use allows)?
It is common to force or propose a project that maximizes the permitted guidelines in the use of land of a property to increase the sale value, or accept the purchase value, but if the market does not have the capacity to absorb the entire project, the project will be a failure.
Structuring and closing certainty
When selling, it is very important to put into the equation not only the sale value but also the certainty of closing the operation. It is important to find out that the potential buyer has a good reputation and has sufficient resources to meet the conditions (price, scheme, and time) agreed upon in the sale.
If you are considering contributing land or associating with a fund or developer, the most important thing is that the formula that will execute the project generates confidence in you.
Real estate businesses are complex and long-term projects and are very important as they share values and business vision. You may want to be associated with people who have the capacity and experience to execute, the liquidity to invest, and the ability to solve problems in a business, which has many variables.
When thinking about the sale price of a piece of land, the seller has to understand the financial behavior of the real estate. The more money that is asked for in advance, the less value can be offered for a piece of land.
To the extent that the seller is willing to accept a longer-term in the payment of his land, or contribute it totally or partially in exchange for the finished product or a % of sales or a mixture of these concepts, the total value that can be given to the land is substantially higher.
These schemes also allow the owner of the land to capture the surplus value generated in the project over time (in exchange for waiting longer to receive parts of the payment).
Writings in Order
When the deeds are registered in the Public Registry of Property, it must be verified that the property title is correct, that is:
- That the measurements coincide with what the text says.
- That the owner is the same person who seeks to sell the property.
- That the location is correct and coincides with that mentioned in the text.
- Understand the effects that the property could have (for example avenues traced but not yet built, bridges, rivers, etc.).
- As an important note, you should also know that it is possible to see the history of all the previous owners of said property through the history of the Public Registry of Property.
Characteristics of the area
These are some of the characteristics that indicate that the land would be in optimal conditions to be considered:
- Check that the land has the authorization to build between the mayor's office or municipality.
- Get information about the possible trends, background, or risks such as landslides, floods, hurricane seasons, seismic zones, or any other occurring natural phenomenon, security trends, etc.
- The coverage of various services is adequate if the property has services at the foot of the lot and/or the feasibility of having the basic services that a real estate project requires.
Why buying land is a good investment?
Buying land is undoubtedly one of the best forms of investment that exist, it is the basis for building a home, and therefore, one of the key pieces in the formation of wealth. The lands are properties with surplus value, that is, they do not lose value over time. On the contrary, a property increases in price year after year, and much of this depends on its location.
Therefore, it is important to make a correct choice, taking into account basic aspects to guarantee a good purchase.
- Evaluate the property
Request the review of deeds, as well as evaluate the general condition of the lot: soil, size, shape, maintenance, and location.
- Review documentation
Verify that the documents are in order and coincide in data, characteristics of the land, and legal specifications. It is also important to know if the property is registered in the Public Registry of Property and if it has pending liens or mortgages.
- Consider whether the land is suitable for its intended use
The property must have certain characteristics, according to its intended use, be it industrial, agricultural, commercial, or residential.
- Consult land use authorization
Go to the corresponding delegation and check if the land has land use and/or construction permit.
- Explore the geographical area
Ask government offices, neighbors, and merchants in the area about the most recurrent problems, such as floods, security, and health service. Investigate if there are factories, gas or oil pipelines, garbage dumps, drainage canals, or conflictive sectors in the area.
- Review basic structure services
Make sure that the property has the necessary basic services, such as drainage, drinking water, electricity, gas, and electricity. Also, it is important to note that level ground makes construction easier and cheaper.
- Consider pros and cons
Once the above points are taken into account, it is time to make a general balance between the advantages or favorable aspects of the land and the inconveniences that it may have. It should also be assessed if it meets the necessary characteristics, according to the construction plan, for example, orientation, location, climate, etc.
Some extra points to consider before purchasing the lot are:
- South-facing plots tend to have a higher moisture content, while east-facing plots generally receive more sunlight.
- In addition, the buildings located to the north are cooler, as they allow the passage of air.
- The best location to build a building is on a corner since there are 2 facades, which allows better projection of the position of rooms, ventilation, windows, doors, etc.
Keeping the above aspects in mind, it will be easier to be sure of buying the right land. However, it is advisable to ask for professional advice, especially if the land presents some irregularity from the moment reports are requested.