Buying Land and Building Your Weekend Home – Part 1

The summer exodus to the Hamptons and Upstate New York has always been a feature of life in the City. But this year, due to the pandemic, the market for summer rentals saw far more activity than usual. Many got priced out of it altogether as demand quickly outstripped supply leading to some insane bidding wars. Those who were fortunate enough to secure a rental are probably now feeling just how vulnerable the market is to sudden demand and wishing for a more permanent getaway. One solution might be to buy a parcel of land and build your own vacation home, either now or in the future.

With inventory so tight, buying and building your own custom-designed home could be the dream solution. However, such a proposal is not for the faint of heart. It takes far more time, money, and planning than buying an existing home ever could. To give you an idea, read on to see what it takes to stake your own claim to a piece of pristine land and build your dream home.

What it Takes to Buy and Build a Weekend Home

Anyone who’s bought a New York City apartment or home before should know that this is a whole other ballgame. Compared to choosing between home listings, choosing a piece of raw (uncleared) land to build on is a lot harder to decide on. There are so many factors to consider, all of which are individual to each buyer, that you really need to have a firm idea of what you’re looking for. Raw land suitable for building on isn’t exactly numerous either, which means you could have to wait a while before finding the right spot.

Financing will also be a little different from what you’re used to. Although you won’t be expected to pay upfront for any land purchase, as used to be the case, the terms of a land-only purchase will differ from traditional home mortgages. How much they’ll differ depends on the lender and the exact terms of the purchase. For a start, you’ll want to choose a local lender and see what kind of programs they can offer.

Price is another wildcard. The costs of building on raw land will be dramatically higher due to all the prep-work that’s needed before any construction can begin. Once construction does start, the costs can run anywhere from $225 to $450 per square foot, with the latter being closer to the norm. For the land itself, the costs of purchase depending on a wide range of factors, with the location for once not being the top deciding factor. Not everyone desires proximity to a village or small town; others want seclusion and a place to call all their own.

Checklist Before Starting Your Search

If all of the above hasn’t scared you off, then let’s get to what you need to consider before starting your search or contacting a broker. A clear vision of your ideal purchase is tantamount to any successful one.

• How much land do you want? – Be clear about how much land you’re looking to buy. If your answer is “a lot,” then be careful what you wish for. More land means more time and money spent on upkeep. Think about your needs and square that with your budget.
• Where do you want to live? – Do you envision living off the grid in a secluded area, or do you prefer being close to an urban area? Think about how you want to live and what sort of comforts are important to you. That will tell you what you’ll need when drawing up construction plans.
• What do you plan to do with this home? – Will this be a seasonal retreat or a year-round destination? If the latter, then you’ll need to think about ease of access during the winter and access to schools if you have children.
• Do you desire a waterfront property? – Having a river or lake on the property is a common requirement for many buyers. Usually, they can pursue a specific activity such as flyfishing (river) or waterskiing (motor-craft-approved lake). Consider how important this is to you as it will mean paying a higher price than you would for a non-waterfront property.

Getting to Closing: How to Shop for and Buy a Plot of Land

Get a Broker with Experience in Land Purchases

Beyond a doubt, you’ll need a buyer’s broker with a proven track record of closing on land purchases. They can walk you through all the necessary steps, find a property that fits your needs, and ensure you pay a fair price for it. Choose someone local who knows the area. They’ll be able to sniff-out any off-the-beaten-track properties that may not be publicly listed yet. They’ll also have a more thorough understanding of the restrictions on the use of any given property. Ask for references from previous clients that they’ve worked with and talk with multiple agents before deciding on the one to hire.

A clear sign of a good agent is one that asks lots of questions to help them better understand what you’re looking for in a land purchase. Lay it all out with them, and don’t be shy when it comes time to talk about your finances and budget. You may walk into the meeting with only a vague idea of what your ideal purchase is. But if you leave it with a firmer, almost tangible sense of it, then you’ll know you have your man.

Know-How to Assess Each Property You Inspect

A good agent is essential, but they’ll need your input to help find the right spot. After all, you’re the one who’s paying, so you should know what it is you’re paying for. Do a personal inspection of every property that catches your eye and know what to look for and ask about.

• Zoning – Find out how the local planning authority zones the land. Anything that’s zoned for something other than residential use, such as agriculture or industry, will be of no use to you. Ask about setback restrictions, which will inform you of where a home can be built on a property.
• Utility Hookups – Check to see if you have access to utility services such as electricity, water, and natural gas. If you don’t have access to a sewer line, then you’ll need to know if the property can accommodate a septic tank. Even if utility lines are available, ask how far away they are and what it will cost to run them to your property.
• Preparation – How much clearing will be needed before you can start construction? The costs of this will fluctuate greatly and need to be factored in when considering the real costs of a purchase.
• Pricing – How much are you willing to pay for the type of property you’re looking for? Asking prices can be all over the board, which makes it really hard to determine if a property is reasonably priced or not. Do plenty of research before making an offer.

Secure Financing

When it comes time to enquire about financing, make sure you go with a local lender or bank. Here’s a look at some of the mortgage programs that may be right for you.

• Land or Lot Loan – Depending on whether there’s any infrastructure already on the land, you’ll need either a land loan or a lot loan. Land loans are for the purchase of raw uncleared land. A lot loan is for when some of the pieces are already in place, such as a building permit or utilities. The rates for both of these loans tend to be higher as lenders consider them a risk.
• Construction Loans – This is a short-term loan, usually one year in duration, designed to help get your project off the ground. The lender will need to see your construction plans and budget before approving this. These loans are typically paid out in stages that correspond to the construction timetable.
• Construction to Permanent Loan – This loan type builds on the construction loan by becoming a regular mortgage once the house is built. Essentially, it’s two loans in one, which saves on fees as there’s only one signing.

Step 4: Purchase and Planning

The previous steps will take some time. Don’t try to rush things. Instead, take your time to correctly assess each property and determine the best choice for financing. Your buyer’s agent will be there alongside you the whole way to offer advice, find the right people, and act as a sounding board. Once you’ve found the right place and secured financing, it’s on to closing and the next phase, construction. This will be covered in Part 2, where we’ll explain how to get building permits, put together a team, and complete your construction in the most cost-effective way possible. Stay tuned because we’re a long way from the finish line yet.