Three Important Questions to Ask Before Buying Land

Updated March 4, 2024

Finding the perfect acreage to build your dream home or start a farm is a once-in-a lifetime opportunity for many rural property buyers. Whether you’re searching for a large lot, small farm or other bare land, knowing what to look for in a property and working with experienced professionals can help you avoid a lot of frustration and, potentially, costly mistakes.

Buying a piece of rural land is more complex than many people expect, so working with an agricultural real-estate professional and a lender who is both experienced in rural property can make the process smoother.

Here are three questions to ask yourself if you’re thinking about buying rural land…

How will you use the land?

Before deciding on a property, you should be clear about how you’re going to use it over the entire timeframe you’ll own it. Knowing how you want to use your land while it’s bare and vacant will help you focus on certain property features as you begin your search. Are you looking to build your dream home or are you looking for an investment in timber? If you’re planning an agricultural enterprise, which type? An annual or tree crop? Livestock? Specifying your intended land use will also help guide decisions on determining how many acres you want and the locations you want to look into.

Does the property meet your criteria?

Once you’ve identified how you plan to use your vacant rural land, you can assess every parcel you’re considering against what these plans will require. Beyond the location and terrain, which you can easily investigate, you’ll want to do some research to ensure that:

• The soil will support the specific crops and/or structures you plan and presents no environmental hazards.
• The water supply is sufficient and safe.
• Access is available, and easements are not prohibitive.
• Local zoning regulations will allow what you plan to do in both the short and long term.

If you think you’ve found the right parcel for your plans, work with your lender and the real-estate professional to ensure the title is clear and that the land’s appraised value is in line with the sales price.

Can you finance land?

Buying land is completely different than taking out a mortgage, and it’s no secret how expensive land can be. Most buyers will need outside financing to close the deal. Typically, you’ll need to pay 20% of the sales price in down payment and then work with your lender to finalize other loan terms, such as the interest rate, fees and term.

In addition, the appraisal values on farmland are different than that on regular home appraisals. Americans who are starting out in farming or buying farmland for the first time may qualify for a special loan program through the Farm Service Agency in conjunction with Farm Credit. This program requires just a 5% down payment with the remaining 95% financed by the two lenders for a 20-year term at lower-than-market interest rates.

Buying rural land can be both challenging and rewarding. Make sure that you check every aspect of the property and find the right lending and agricultural real-estate professionals to help ensure that you’re making a wise and informed decision.

Farm Credit of Central Florida provides farm loans, home loans and land lands. For more information visit us at https://farmcreditcfl.com/contact-us or call us at 863-563-2703