for sale sign on undeveloped land

Undeveloped Land: Everything Potential Investors Need To Know

The Short Version

  • When looking at factors such as total cost per acre, buying undeveloped land will almost always be the most affordable option
  • Investing in undeveloped land can be appealing because land is a limited resource that will always be in demand
  • If your property is off the grid, you will need to install water, gas and electricity pipelines

Contents

See what mortgage you qualify for

NMLS #3030

*See what you qualify for

We teamed up with Rocket Mortgage to help you get house-hunting sooner! Answer a few questions to get your commitment-free, personalized rate 💸

Get Started by selecting an option below

What kind of loan are you interested in?

What to expect

Tell us what you need and a representative from Rocket Mortgage will give you a call. You’ll have support at every step.

What kind of property do you want to purchase? What kind of property do you own?

Why we’re asking

Rocket Mortgage® can provide a more accurate rate estimate if they know what kind of property you’re interested in.

NMLS #3030
How do you use your property? How would you use this property?

Why we’re asking

Having a little more information upfront helps Rocket Mortgage® provide a personalized rate faster.

NMLS #3030
When are you planning to buy?

Still House Hunting?

Hope you find your dream home soon! In the meantime, it’s never too early to know your rate.

NMLS #3030
Are you a first-time home buyer?

It’s all good:

Whether it’s your first – or second property – Rocket Mortgage® can provide you with a rate estimate.

NMLS #3030
Do you have a second mortgage?

It’s all good

If you have a second mortgage, it’s no problem. Letting us know helps to customize your rate.

NMLS #3030
What is your credit score?

Don’t know your score?

Don’t sweat it! Make your best guess. Credit scores range from 300 (low) to 850 (excellent).

NMLS #3030

Tell us a bit more about you

What happens next?

A representative from Rocket Mortgage® will be in touch to discuss your commitment-free, personalized rate. Then you can decide whether you’d like to lock it in!

NMLS #3030

Enter your contact info so we can get in touch

By submitting your contact information you agree to our Terms of Use and our Security and Privacy Policy. You also expressly consent to having Rocket Mortgage, our Family of Companies, and potentially our mortgage partners contact you about your inquiry by text message or phone (including automatic telephone dialing system or an artificial or prerecorded voice) to the residential or cellular telephone number you have provided, even if that telephone number is on a corporate, state, or national Do Not Call Registry. You do not have to agree to receive such calls or messages as a condition of getting any services from Rocket Mortgage or its affiliates. By communicating with us by phone, you consent to calls being recorded and monitored.

NMLS #3030
Your information has been sent!

A home loan expert from Rocket Mortgage® will reach out to you soon with your personalized rate.

Your information has been sent!

A refinance expert from Rocket Mortgage® will reach out to you soon with your personalized rate.

Investing in real estate can be a very lucrative endeavor. To generate a significant return on your investment – or fulfill other goals such as having a place to live – you will need to do your best to choose the right property.

One important factor to consider will be location. For example, property in midtown Manhattan might be considered thousands of times more valuable than property located off the grid. And in addition to a property’s location, you will also need to consider whether the property is developed or not.

Investing in undeveloped land can be appealing because land is a limited resource that will always be in demand. And if it’s discovered that the land can be put to good use (fertile soil, minerals, nearby development, etc.), the land’s value will climb.

To become a successful land investor, you should carefully consider the type of property you are purchasing. When you’re deciding which property is right for you, there will always be some degree of risk involved – which is why you shouldn’t jump at the first property you see or seems to be a good deal.

Our guide will walk you through the most important things you need to know to invest in undeveloped land, including how to find a parcel that meets your needs.

What Is Undeveloped Land?

Undeveloped land is often referred to as “raw land.” The exact definition can vary depending on who you ask, but undeveloped land usually refers to land that does not have any structures, infrastructure, land utilization or other types of human interference.

Some people might consider any land that includes minor features like a gravel driveway or a small shed to be undeveloped or mostly undeveloped. Land that is used for natural purposes, such as camping, hunting or fishing, might also be considered undeveloped.

If the land is being used for farming, grazing, mining or other extraction activities (operations that take resources out from the land), it would likely be considered developed, no matter how “out there” the land might feel.

If the land contains a major structure – especially if the structure has electricity, gas and running water – it would also be considered developed.

Whether you are working with the cheapest land in the U.S. or more expensive land, there are plenty of ways to make money from undeveloped land.

How Much Does It Cost To Build a House on Undeveloped Land?

If you live in a highly developed area, adding a structure (such as a small home) to an untouched parcel of land is usually pretty affordable. Depending on the size of the home and its features, you might be able to build a house for less than $50,000, though factors like local zoning laws might increase your costs.

If you live in a sparsely populated, undeveloped region, your costs can accumulate rapidly. The harder it is to get supplies to the building site, the more you will end up paying. If you decide to build a house 5 miles away from the nearest road, you’ll likely end up paying more in transportation expenses than you will in raw materials.

There are different ways to reach your build site, including simple strategies such as using a pack mule or more complex strategies such as transporting by helicopter. In both cases, however, your costs will continue to add up.

Another important factor to consider is infrastructure. If your property is off the grid, you will need to install water, gas and electricity pipelines. As you’d expect, this could cause your final expenses to skyrocket. That’s why it is important to develop a comprehensive building plan when you’re comparing different parcels of land.

The Pros and Cons of Buying Undeveloped Land

Contrary to the impression made by some popular HGTV shows, buying and developing undeveloped land is about more than the price of the land. With that in mind, let’s take a look at some of the pros and cons of buying undeveloped land:

Pros of buying undeveloped land

Some of the pros of buying undeveloped land include:

  • Flexibility: There is a lot of undeveloped land out there. You can choose from a number of locations to find the parcel of land that works well for you.
  • Low cost: When looking at factors such as total cost per acre, buying undeveloped land will almost always be the most affordable option. Just be sure to add in the costs of any future development.
  • Low competition: The market for undeveloped land is usually less chaotic than the market for developed land. That means you are much less likely to end up in an expensive bidding war.
  • Fewer maintenance costs: Until you develop the land, your monthly maintenance costs will be remarkably low, and in some cases – nonexistent. Additionally, undeveloped land usually has lower insurance costs and lower property taxes.
  • Potential return on investment: Land will always be in demand. And it is a resource we cannot make more of. As the population continues to grow, demand for land will increase, putting you in a position to earn a significant ROI.

Cons of buying undeveloped land

You should also consider these drawbacks:

  • Costs of permits: If you develop the land, you will likely need to secure several permits. In addition to construction permits, you may also need permits to lay your water and gas lines.
  • Longer time: Because the land is undeveloped, the home you build on it should not be considered move-in ready. Depending on the state of the construction industry and your home’s construction timeline, it might be a year or more before you’ll be able to live on the property.
  • Zoning restrictions: Different entities, including municipal, county, state and federal governments, may have restrictive zoning laws. If you want to use the land for farming, mining, hunting or development, you’ll need to confirm that it’s allowed.
  • Larger down payment: It’s harder for lenders to use undeveloped land as mortgage leverage because it’s harder to sell, so you’ll likely be expected to make a higher down payment. The down payment for an undeveloped land mortgage is typically around 15% – 25%.

How To Buy Undeveloped Land

If you are still committed to investing in undeveloped land, keep these steps in mind:

Research the land

Think about what you want to do with the land. Someone planning to farm their land will have different needs than someone looking to build a cabin for weekend getaways.

Once you know how you plan to use the land, you can filter your search and narrow down your land options. If you can, it would also be a good idea to visit the land in person.

Conduct surveys and tests

Surveys are especially important for undeveloped land buyers. A good survey will outline which land you are allowed to access. It does not always match seemingly intuitive landmarks, such as a fence, a river or a road. The surveyor will also explain whether any easements apply to the land you are purchasing.

Soil tests and other environmental tests should be conducted to evaluate the quality of the land. This is a good idea even if you don’t plan on developing the land.

Get a land loan

Once you have picked the land you want to buy and have evaluated its feasibility, you’ll probably need to secure some sort of financing. Enter land loans (or raw land loans), which are used to purchase undeveloped land.

The application process is similar to securing a traditional mortgage, though variables such as your intended use of the land and other factors will likely play a larger role.

Exploring New Options

Investing in undeveloped land isn’t for everyone. There are plenty of people who would prefer to go with a more traditional option. But if you are willing to expand your comfort zone and explore additional options, investing in undeveloped land can provide a wide array of benefits.

If you have some money you’d like to invest in real estate, an undeveloped piece of property might be worth considering.

Take the first step toward buying a home.

Get approved. See what you qualify for. Start house hunting.

You Should Also Check Out…