Buying Land to Develop

I’ve been getting lots of calls lately regarding how to plat or develop land.  That’s a good sign for our economy but the best time to ask questions about development is before you purchase the land.  Here are some things to consider:

Zoning – Your best resource is the local zoning authority; make sure you ask them lots of questions regarding your plans to develop and they can help you determine potential pitfalls.  If you will need to rezone, it’s best to try and get a signed purchase agreement but make it contingent on the rezoning and then don’t close until after the public hearing when you will know if the rezoning will succeed.  You will often need other zoning approvals like a subdivision or planned unit development but those items should be done after you take title.

Land issues – You should meet with a survey team right away and they can help align roads and lots but that can only be done after you delineate wetlands to know where land is suitable for development.  Often wetlands extend much farther than you would guess just walking the land – it doesn’t have to be wet to be considered a wetland. If you are building along a lake, similar issues arise as bluffs or shorelines can greatly impact how close to the water’s edge you can build and it requires a surveyor to really know those details.

Covenants – You may want to create your own rules about what types of homes can be constructed.  Covenants often have rules about pets, outdoor storage, renting . . . Before committing to final rules, make sure you interview some potential realtors and get advice on what’s best for marketing purposes.  Once you sell a few lots, it gets more difficult to change the rules.

Streets – You may need County/State approvals to connect to busier roads so don’t just assume you can access streets or place driveways at your discretion.  Within your development, it might make sense to privately maintain your roads as the road standards are less expensive to construct as compared to when you ask the city or township to take over maintenance.  If roads will remain private, you will want an association in place that can collect dues to help pay for this maintenance.

Title – before you commit to any development, make sure you have a thorough title search completed.  There could be existing easements, covenants or other restrictions that will limit your development plans.

Financing – one normally needs financing to purchase and improve the land for development.  You need to work with a banker that has experience with development and they can help you create a budget.  The mortgage will be on the entire parcel so you should agree in the beginning on what amount the bank will require to release each lot from the original mortgage.  Your budget should also contemplate how long it might take to sell off each lot – be conservative as changes in the economy affect bare lot prices much faster and more dramatically than normal housing stock.

Please send any request for topic suggestions to rene@breenandperson.com.  Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know.  Our purpose is to educate and we hope that you can take something new away from this column each time you read it.