Know the Risks of Buying Vacant Commercial Land

Investing in real estate is one of the most surefire ways to make a profit, but if you don’t understand the risks involved, it can also be one of the quickest ways to lose a lot of money. Take vacant land, for example. It has huge potential to turn a profit, even if you won’t be the one ultimately developing it, but you have to do your homework. 

If you don’t do the research up front, you may discover that your intended plans for a parcel of land aren’t possible, that your plan won’t be approved by the local neighborhood board, that certain building restrictions prohibit your construction, that the property lacks public road access or that utilities would be very difficult to run out there. 

Long story short: before you commit to a transaction, understand the risks involved and arm yourself with all the relevant information. 

Doing Your Homework

Double-Check Zoning Requirements:

The most obvious place to start with zoning is whether the land you’re looking at is zoned for what you intend to do with it. If you determine that your plan aligns with current zoning laws, that’s great! If not, don’t assume it’ll be easy to rezone. You can work with the local zoning office to learn if it’s even possible to rezone a property. Of course, like everything in real estate, rezoning won’t come for free. 

Determine the Approval Process for Your Project: 

You may believe this part won’t be such a big deal, but taking your project through the appropriate channels to get approval can be one of the hardest and most time-consuming parts. To save time - and the potential for denial down the line - figure out exactly what the approval process will look like. Do you need to go through a neighborhood or zoning board? How long does it take for similar projects to gain approval? Will the board members reviewing your project be pro-development or not? Knowing these answers beforehand can help you make better financial decisions.

Learn About the Environment:

Before you purchase any land, make sure you’ve thoroughly investigated the environmental conditions of it. If any part of the land is considered protected wetlands or falls in a floodplain, you may not be allowed to develop it. If there are any creeks, streams or other waterways, zoning and planning boards will likely not be too keen on you obstructing or rerouting them. Then, there’s the wildlife. If any protected wildlife reside on your property, you may not be allowed to develop it and subsequently displace those animals. 

Make Sure You Can Carry Out Your Plans:

Look at the accessibility of any land you want to buy. For any development plans to work long-term, you need to confirm that a property will have access to public roads without relying on easements across other properties. Accessibility is also a factor for utilities. Having access to water and sewer - not to mention electric - is crucial to any development project, and while it’s possible to bring them in, it won’t be cheap. 

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