Dream Farm Fridays: Buying Raw Land 101

Could this be your dream farm? MAYBE!

You've been on the search for the perfect horse farm, you can't find it, and you start to wonder:

Is buying vacant land and building my own farm a viable option?

Today, dear friends, I'll give you my professional opinion on the subject!

Now, my answer to the question of building a farm from the ground up being a viable option is, "It depends." If you're thinking of buying land and building a home and barn, you might want to ask yourself the following questions to determine if building is the right choice for you:

1. Do I need to move RIGHT NOW?
2. Do I have more money than a similar farm costs to buy with buildings already on it?
3. Am I willing to spend many months/years in total frustration dealing with building setbacks, and much more money than I originally thought I'd spend?

Let's talk about these issues. 

It goes without saying that if you don't have a place to live while your farm is being built, this is probably not the right choice for you. If you rent and don't pay cash for the land, you'll be paying a mortgage on the land AND your builders and contractors in addition to your monthly rent. If you can't afford to rent while your new home is being built, consider how moving back in with your parents and living in their basement for a year is going to go. If you're lucky enough to own a home that you aren't paying a mortgage on, and can stay there indefinitely during construction, good for you! If you can afford two mortgages without issue or are in a position to pay cash for the land and construction, well, this may not be a concern for you. 

But what is a concern for everyone is the fact that new construction is always, ALWAYS more expensive than resale. Every. Time. Especially if the lot you end up buying doesn't already have public utilities on it, you're going to have to pay for a well to be dug, septic system installed, and electric lines run out. Before a single block of your foundation is placed, you'll be paying a pretty penny for the site work it takes to get to that point. And like any big project, there are always unforeseen problems and expenses that end up costing you more money than you expected! Also keep in mind the fact that construction loans tend to have a higher interest rate and required down payment than a traditional mortgage loan - but of course, you'll know all of this before you start your search because you will have had an in-depth conversation with your lender first!

Before you even start looking for land, I also recommend that you hook up with a reputable local builder and have plans drawn up for your dream house/barn/indoor. A good builder will also be able to do a lot of the logistical legwork for you, and can be a huge asset in the process of receiving approval for your home and barn. When you're buying vacant land, your builder is an essential part of your team along with your real estate agent and your lender. Talking to a builder about what you want to do will also give you a clearer sense of whether or not you can afford to build vs. buying real estate with pre-existing structures.

You'll also need to become best bosom buddies with our favorite township official - the Zoning Officer! Just like when buying real estate with a home and/or barn already on it, you need to be a thousand precent sure that what you want to build on the lot is allowed by township zoning regulations, that it follows the required specs and setbacks, and that you're able to get all of the required permits. Each township and county has different rules when it comes to new construction and putting in utilities like septic systems, so you'll need to become intimately familiar with these processes as well as the local officials that manage them.

As a buyer's agent, I force strongly encourage my clients to get as many approvals and permits as possible BEFORE going to settlement on a piece of raw land. The absolute last thing I want to happen to any of my clients is for them to spend hundreds of thousands of dollars on a piece of land that they can't build a farm on. In fact, I write it into the contract so that before we get to the closing table, the buyers have received permits and approvals for their septic system, well, and other utilities, as well as approval for their building plans. That way, there are no surprises after they become the proud new owners of a lovely piece of ground.

Buying raw land and building a house and barn can be overwhelming, frustrating, expensive, and exasperating. But at the end of it all, you end up with a farm that is exactly what you imagined, without having to deal with anyone else's ill-conceived logistical nightmare. While not for the faint of heart, starting your dream farm from the ground up can be an exciting way to finally own the horse farm you've always imagined!