Buying land: Due diligence questions

[Dv8tor]

Hello all! I'm interested in getting into real estate investing and I'm researching the subject. If I was interested in purchasing land in Florida and possibly building a home, then selling it, what are the due diligence I should be performing before buying a lot? Thanks.

[Duncan Pollock]

Whether it's Florida or anywhere else, what you need to know before deciding to make a purchase -- and admittedly this can all take the form of a Condition in any offer you make -- is mainly as follows.
1. Is the zoning okay? Usually this has to be "residential" and preferably for single family homes rather than multi-family ones. An exception would be "agricultural," provided it allowed for the construction of a home (which isn't necessarily always the case).
2. Can you get a building permit? What will it cost? What parameters would apply (e.g. front and side setbacks, building/land ratio, maximum permitted height, etc.)?
3. Would building a home on the lot/land be economically feasible (i.e. would you be better off [dollars ahead] if you bought an existing/resale home instead)?
4. How easily -- and profitably -- could/would you be able to sell the home once it was built (and/or, per point 3, could/would you make money more easily and quickly if you bought an existing home, especially at a give-away price)?

In other words, think in terms of the age-old advice: Let the Buyer Beware.

Duncan

[Dv8tor]

Good stuff. Thanks a lot!

[chachi]

Yes, as Duncan points out, you will mostly be concerned about being able to build whatever you are looking to build on the property in question. Usually a trip down to your city's zoning counter will take care of most of this for you. Just be sure to write down all of the things you are looking to do with the property and they will be able to tell you what the current zoning on the property provides for.

[Las Vegas Real Estate]

What we typically do when considering land for development is enter into a Puchase & Sale Agreement that includes a (say) 120-day Due Diligence Period. The Earnest Money is held by (say) the title company that will handle your closing and is fully refundable to you in the event you are not satisfied with your findings during the due diligence. This gives you the time you need to explore all aspects of feasibility.

During this period you will want to request a preliminary title report from the seller, wherein all liens, easements and exceptions would show up, if any; and, if your bank requires it, have an environmental study done (called a Phase I).

Ask the seller for a plat or land survey (not an ALTA survey, that will be your expense after the due diligence and you're sure you're going through with the purchase) --- and determine where the utilities are. That will have a big impact on your development costs. You'll do well to consult with a civil engineer, too.

And... everything Duncan said. He is right on. Good luck!

[gordhead]

Another thought about Florida in particular.....the water table is at about ground level and there are significant problems with sink holes in many areas. Alot of the land that can be built on......already has been.

For instance...we had the opportunity to purchase 5 acres, 2 1/2 of it was wet....another 1 was "conservation" of the wet area and the remaining 1 1/2 had significant restrictions on the removal of trees...ie....there wasn't enough of the land available to build a house on.