Land Investment
Land Investment – Know the Rules Before You Start
By Buyincomeproperty.com
Oct 28, 2005, 12:30

Land investment is a hot real estate topic right now, and with good cause. A person with the vision and financial backing can take a piece of property covered with nothing more than scrub brush and the occasional small critter and make a fortune. And what’s more, land investment looks like an excellent return on the dollar. After all, that vacant land and scrub brush will probably sell for a song. Add a few upper scale houses and you’ve got an instant fortune! Right? Maybe.

Before you decide that the land investment is going to become a subdivision, take a look at some of the hurdles you’re going to have to clear.

Most cities have a long list of ordinances regarding development of investment land, and a complex building code. This is usually the biggest obstacle between the land investment and the sale of the first house. Rules commonly govern the size of lots, amount of space between the houses and property lines, and the actual construction. In some areas, all new houses have to meet safety codes for withstanding wind. Wiring plumbing and many other aspects of the division and construction will be overseen by city officials, and all these requirements must be met before the land investment can turn a profit.

Another point to be considered in the land investment deal is how to get utilities onto the property. Electric companies will often run the lines themselves, figuring that the deposits and service payments from those future customers will pay for their investment. Make sure that’s the case in your land investment situation. There are times when the power company will require larger deposits or additional fees be paid by the home owners to recoup the installation costs. That could impact your ability to sell the property.

Water and sewer lines may very well be the responsibility of the person making the land investment or the developer. Cities will sometimes help with the installation, or will finance the cost, but you – as the person doing the land investment – need to be sure as it will impact the total cost of land investment.

Streets are another issue for developers. If you think that someone makes a land investment and starts construction on houses, prompting the city or governing entity to build roads, you’re wrong. In most cases, the governing entity not only requires that the person making that land investment build the roads, they also regulate the construction. Sidewalks, gutters and storm drains may also be part of the cost of land investment.

If you encounter a problem while developing your land investment, don’t immediately give up. If it’s a case of building codes, the governing body may have the power to grant a variance – a new rule that allows you to break this particular rule, but only in this particular instance.

If you have looked at every potential cost associated with the land investment opportunity and still feel it’s going to be a good deal, be prepared for the unexpected. Take time to meet your building inspector and attend a meeting or two of the governing body, whether that’s the city board, zone enforcement board or some other group. If you know the people who have the power to offer leniency, it can help you if the time comes when you need that help.