BUYING VACANT LAND

What will secure your investment and ROI ?

IT’S A NO-BRAINER, VACANT LAND, YOU CAN SEE EVERYTHING, flip in 1/1 (Year and a day) and enhance your working capital to flip more. NO IMPROVEMENTS ~ NO RISK, RIGHT?  Yeahhh, NO! Rethink that. Think Swamp Peddlers, ads for $99 down/$99 month for ranchette, Land Companies selling parcels in a multitude of states, Tax Deeds ….

The risk in vacant land (lot) is will market increase and you will see a return higher than your initial investment plus basis costs. Market trends aside, the following list includes the top 20 most serious of considerations you should inquire to your agent to investigate. “Cheap”  does not usually indicate a good deal you can flip in a year and a day and see a hefty ROI. Return On Investment. This is not inclusive to a Phase 1 or Phase 2 ESA performed in your due diligence period or large tract, farm, ranch and commercial.It is an excellent start though. IF your agent is not versed in these areas, call me or seek someone that is, it can cost you!!!

THIS LIST IS EXPANDED, but not full detailed, however is enough for you to determine your risk of ROI.

• Is there access on the ground and on paper, demonstrate rights of others to use the land (easements). Request aerial of parcel and neighborhood. In these aerials, you are looking for development, other houses, and roads!
• Where is closest power service line, not transmission. Check aerials, look for neighbors. call power company. Finding powerlines on imagery is not tricky. If you look to the sides of the roads with the shadows, and cleared straight lines across forested areas. Verify power lines are service lines not main transmission lines. Different voltage capacity, accessibility, 2 phase, 3 phase, exceeded line use, size of power easement.
• Municipal services in right of way, water/sewer, line construct or well and small wastewater facility required. Municipalities maintain utility maps, they should be evaluated prior to purchase. If municipal services such as water and sewer are available, and inquiry as to the size of the surface line, as well as the ability to tap into a sewer line and it’s requirements. Will it require a lift station? Yes a well and small waist water facility are required, estimates for those services should be obtained by a septic installer and a Well Driller. If they have worked in the area, they will know what soils they are working with as well as average depth of the aquifer.
• Area well depth or size of municipal water service line and age. Again, you want to know the depth of Wells in the area for the cost. You may also contact the governing authorities for water quality testing that has been submitted, and if you are property will benefit from a reverse osmosis system and a water softening system. Municipal water lines Need to have a determined size and age. There are areas that are serviced by municipal water however you cannot hook into the existing line due to its age and construction. This can be very costly.
• GIS aerial with neighborhood, utility, scrubjay(or other such shielded species), most recent base map and FEMA. The geographic systems can be your friend, in determining, if there is a high shielded species area, neighborhood, development, and type of neighborhood, proximity of utility services, also the flood plane as it applies.
• Wetlands map. Soil type. Subsidence and signs of subsidence. A wetlands map can provide you with the potential of costly mitigation. A soil survey will also provide subsidence signs of subsidence and the risk of subside as well as the given soil types, depending upon your intended use.
• Mineral map. Is it a severed estate, minerals owned by others. Many states have unified and severed states. Meaning a unified state- the minerals, sub surface estate is still attached to the surface estate. Many states do not permit the air rights to be severed any longer. Has the estate been severed, know that someone else has a right to use this land.
• Gopher tortoise (or other such shielded species) indications and history of population in immediate area. Shielded species, such as the gopher tortoise can be determined by a drive through the area Talking to the gopher tortoise mitigation company. The more Burroughs the higher the cost.
• What is ground cover and tree type and age. Is this property covered with (mature ugh) Australian Pines and pepper trees, or do you have Palmetto’s and yellow pine or a pine, heritage oaks, saw grass? All impact development cost, hence value to sell. If the property has been cleared, you will need to continue to keep it cleared factor that into your length of time to hold and ROI.
• Survey plat and corner markers. Location. If the property doesn’t have a current survey, if there are no corner markers, if it is a lot in an already developed neighborhood with close neighbors, a survey is highly recommended. If you can get it under contract for a price you are comfortable with, including the consideration that it will need a survey, then get that survey prior to the end of your due diligence. Make that contract contingent upon a clean acceptable survey with no encroachments!
• Zoning and future use. Past use. Land Use. Be certain that the land has a current use and future use that is conducive to the neighborhood as well as your intended resale use.
• Building envelope and Setbacks. The county and City both have setbacks, as well as what may be embedded in a protective covenant, determine these numbers prior to your due diligence.. You want to know what your building envelope is going to be and what those setbacks are, not just for you, but for your neighbors if they are already developed.
• Legal Description, not short legal, full legal. Make certain your contract includes the full legal description. The legal description as it’s written, will give you insight as to the age of the development, the potential risks of access, and if in fact, the property that you are buying is in fact, the property that is being sold on the ground. 
• Water, surface, type, navigable. Submerged rights. Is there water on the property, is it a perfectly round circle, is it a retention pond, is it a waterway that drains into a larger waterway. Does the lot extend under the water, are their submerged rights, is it navigable not by just visual, obstructions, but depth and sandbar?
• EPA impacts. EPA, DEQ, governmental impacts, volumes on this topic. Is it under current guidelines for action.
• Proximity to services, going concern. Distance to creature comforts, groceries, restaurants, hardware, etc. going concerned, is there known future development, gravel, pits, sand, excavation, commercial industrial that will impact the peaceful enjoyment and value of this property.
• Is anyone currently using? Homeless, dumps, storage, UST’s. If it is a forested property, a telltale sign of homeless is a worn path, as well as seeing tarp tents and the use of people coming and going. Dumps are not as easy, however, if the property was once a larger tract or a ranch or grove you may find dumps on site. Are there any underground storage tanks, this is a whole other can of worms that needs to be addressed as it can be very costly to a current owner.
• Encroachments, open and notorious use. Are there roads crossing this property, is there a two track that is obviously being used by someone to access another property, and has the owner allowed the use or has it been open and notorious? Save a legal fight or property devaluation based on use of others.
• Past improvements, prior uses (residence, mineral extraction, landfill, etc.).Google imagery, while older images may not be crystal. Clear, you can look for a history of residence, old septic systems, wells, improvements, mineral, sand, gravel, extractions, landfills, ponds constructed without permits.
• Preliminary title work and municipal lien search, and REQUIRE the copy of exceptions in Schedule B! Require, a title, commitment and municipal lien search as well as a copy of the exceptions in the schedule be. This document can be extremely useful in defining things that will otherwise not be seen, but are a burden or a cloud to the land. It is also your protection that a tax deed and transfer was issued timely and appropriately. A title commitment will also verify the lack of legal access. Just because there is a road to it does not mean you have a right to use it. Do your diligence! 

There are deal breakers, walk-aways, seriously consider another, type properties. Others are value and resale impacted worth a risk and cost to correct. Some are the perfect risk for acceptable ROI.

Actual Factuals

Land breaks prior to enhanced zoning regulations have created parcels landlocked from others. An 2800 acre parcel that was divided after a family death left a parcel of over a section of land landlocked. There was a road that followed along side a fence line in from the north, as well as a road that crossed a creek which flooded in the spring on the south east area. The original title commitment stated the property touched a county right away along the southern border. That county road was never constructed. And I did not believe that the property touched it. The title company required a survey of the right of way, after the cost of nearly $40,000 the survey determined the right away did not touch this property therefore could not serve it. Which in the end was not a bad thing because the owners would have to construct a road to county specs as well as build a bridge and that would just get them to the property. Revised title commitment showed the property did not touch a county right away nor were their easements in place to use either of the existing roads. The neighbors on all sides held out from providing an access easement by purchase, forcing the owners of the land to file to force such. An independent evaluator was hired at the cost of the landowner as per the county to evaluate the access with the least amount of impact. It was determined the least impacted owners and most feasible access would be along that fence line in that road, that existed for over 100 years. At that point, the Neighbor’s attorney, advised to negotiate a price and stop blocking the access litigation. The cost of the easement litigation was over $70,000.

A small development of 5 acre tracks in a rural area also known for the extraction of minerals by surface excavation. Title commitment, schedule be exceptions revealed a paragraph stating the mineral rights were not included, and were in fact sold to the mineral extraction company, actively extracting in the area. In this case, the Resource company has the right to provide notice to vacate the property, pay for surface damage, and excavate or extract those minerals at time this property was sold, no action on the part of the Resource company had been taken. But they have a right to.

Several parcels of land under a pair of main transmission lines were sold repeatedly for residential use, the depth of the parcel was 150 feet, the closest central line ran across the property line. The utility power easement was a total of 250 feet 125 feet on each side leaving an open envelope of 25 feet from easement however, the front setback is 25 feet.

An original survey from the 1920’s revealed lot sizes of 75 wide and 150 foot deep. Right of ways for access were outside of the lot. A resurvey revealed there was not enough property from one end of the street to the other to match the original Plat survey. The shortage was divided between all parcels leaving the 75 foot lots at 74‘3”. This created a conflict between two neighbors as one Surveyor did not take into account the compensation made by the resurvey. A third Surveyor verified the correction was accurate.

In considering a sale, I mapped the legal description of the subject parcel. The description was the rectangular survey system description, with a range of 23. In mapping, section 31 it proved to be entirely submerged in the river. The address to the property was 36 miles to the east where his home was located. In reviewing the two previous deeds, it was discovered there was an error in the description. It was advised the homeowner contact the attorney that prepared the deed and have a scriveners deed prepared as the previous owner was deceased and could not endorse a corrective deed. 

A Brokers price opinion on a condo with a deed boat slip For the purpose of settling and estate was being performed. The legal description was reviewed, and found not to include the boat slip. The previous four deeds were reviewed, it was found in the original transfer from the developer this condo was assigned and deeded slip number one. There were subsequent deeds which swapped slip one for slip seven, a subsequent deed, which did not include any slip! It was recommended that the owner take these documents to the title company that provided her title insurance and seek resolution and corrective deeds. The purchase agreement did call for transfer of the slip, slip, seven, as well as the condo. The title company did not resolve the issue, I advised a claim be made to the underwriter with copies of all documents and emails. 

I am not an attorney, but a real estate broker, legal descriptions, to me, are the black-and-white of ownership and with all other related documents, such as easements, right of ways, use of others as secondary, however integral. If the deed does not include the description of the subject property completely and fully, is it clear who has ownership and control of that property. Before you invest, or if you have invested, it’s reasonable to clear other claims of ownership and clarity in your ownership, in a correct and full legal description.