Purchasing a Plot to Build On: Here’s What You Need to Know

I’m sure you have had the dream about finding a cute plot and building on it. I know I sure have. I remember last year when the pandemic hit I spoke to my friends about just going out and buying a piece of land and putting a tiny house on it in upstate New York. I figured we could use it on the weekends and rent it out when we are not there. How hard could that be, right? Well, it turns out it’s not a simple as I thought.


Whether it’s putting a tiny home on a piece of land or doing a full new construction build, there are many factors that I was unaware of that go into looking for and purchasing land. Luckily, I have had an amazing client this year who is taking on a project like this and I have been working with her through this process to do just that. Because she has entrusted me with such a huge responsibility - finding the most incredible piece of land - I have gone to town researching and speaking with experts so that I can successfully steer her in the right direction. Throughout the process, I have learned there are some things that you need to look for:


Topography: This is usually the first priority for someone looking to purchase land. What does it look like? Does it have trees or is it barren? Is it hilly or is it flat? Is there good soil or is it rocky? Does it meet the aesthetic that you are going for with where you want to build your home?


That is pretty easy for a client to say upon first look. However, it is important that a client also think about the different seasons and how that will affect their specific plot of land. For example, if you are looking for seclusion and privacy and you happen to be land searching in the summer months, will you still have the same level of privacy in the winter when the trees shed their leaves? Or is there a house that will suddenly be super visible where there is no foliage in the winter?


Do you want a house set in a forest?


Do you want a house set in a meadow?


Another thing to consider is waterfront property. Yes, it’s gorgeous. I can’t deny that. #lakehousegoals am I right?!? But when you actually start to inspect the land what roll does that water play on your build? Will your house end up being in a flood zone depending upon where you want to place it? Is it even possible to build near the water due to the amount of moisture in the soil? Will you have to change the design of your house so you build it up higher off the ground to meet code? All plots of land in Far Rockaway, that are getting rebuilt after Hurricane Sandy, now have an entirely new building code that they have to meet in order to be rebuilt. Those homes now have to be built a certain height above the ground thus removing the opportunity to have a basement. So is your dream style of house even permitted to be built in this specific area based on the current building codes?


Potential Flood Plain


Municipal or septic and other utilities: Another thing you must consider is how are you going to get water and sewage service to your home? And with this, like every decision in life, there are tradeoffs. If you are within city limits, you will most likely have access to municipal water, the city’s sewage system and local utilities. Some people prefer this because it spares you the initial cost of drilling a well or building a septic system. With that being said though, the downside is you will have monthly costs moving forward depending upon how much usage your house utilizes. You may have additional installation costs as well depending how far back you plan to build and how much distance you will have to cover to connect to the municipal system. You also will run into a lot of red tape in regards to permits and it may be a challenge to interact with the appropriate members of the health board in the city when getting the home build approved.

Subdivision Plan


If you are not in a local city, you will have to vet the land thoroughly to ensure that you can in fact drill a well and install a septic tank. The first step to this is to hire an engineer who specializes in this. They will run a perc test, which is a test to essentially see how much water percolates through the soil, and the results of that test will determine what type of septic system you need to install (in-ground, semi in-ground, or above ground). Local code will also determine how big the drainage field needs to be. This is often related to the design of the home, specifically the number of bedrooms and bathrooms you plan to install. Each local jurisdiction is different and the rules on that are constantly in flux so make sure you investigate and do your due diligence before you close so that you can be sure that you will be permitted to build a house with the amount of square footage you have intended to.


Wells are also a major consideration and can vary in cost widely. Again, specific engineers will need to be hired to help you assess if, where, and how deep a well will need to be drilled in order to support the amount of water usage your household will need. These costs can be extremely large in the beginning, however they do tend to have lower costs month-to-month after they are installed and in regular use. Future costs to anticipate would be pumping out your septic tank every decade or so and regularly getting your well water tested annually and possibly having to replace the well pumps as they wear out.


Sometimes it’s just not possible to put in the size of septic and well you need on a given piece of land to support the size of house you want. This is all part of the due diligence process that should be explored before you close on a plot of land. The worst thing you could do is to close on a piece of land only to discover you can’t build on it what you had intended to build on it. Which leads to the next thing area...


Easements and Setbacks: Every town and every plot of land is different. You 100% need to get a survey when you are purchasing land, even if there already has been a survey before. A lot can change or come up over the years when a piece of land is owned by a given owner. There may be new restrictions that the town has imposed since the previous owner purchased the lot. For example, I was looking at potentially purchasing a school house that was located right next to a state park. The structure was so close to public state park that now the laws have been changed so a new build couldn’t be build in that exact same spot today. The township has now instituted a 150 yard setback and while that home was grandfathered in, I couldn't add another structure on that plot if need be. Also, if I were to tear it down to build up new, I wouldn’t have been allowed to. Due diligence in regards to easements and setbacks are very important.

Little School House I Considered Buying


Oftentimes weird shapes of plots of land end up being virtually unbuildable because the town has added in new set back rules. I looked at another plot of land that was an acre in Woodstock for my client, but because of the shape, the purchaser would only be able to put a tiny house on there at best due to the large ratio of setbacks compared to the depth of the lot. That was a deal breaker for sure because it didn't permit them to be able to build the size of house they were looking to build.


You also need to check to see if the neighbors have an easement to your land. Do they have littoral rights? Meaning, is your land is next to a lake but they have the right to transverse your property to get to the water to use and enjoy it themselves? Or perhaps there’s a road that goes through your property to get to theirs and they have been using it for more than a decade. Technically they don’t own your plot but legally you would not be able to deny them access to drive through it if they have been using it for that length of time. That is an easement that has been created by necessity.


And of course you'd want to get a survey for the obvious reasons, to verify that the plot you think you are purchasing is in fact the size, shape and actual plot that you think you are purchasing. I have a funny story about this that I will share in my bestseller book one day. I also may share it over a glass of whiskey if you’re buying, lol.


Make sure the plot is marked correctly


Taxes: This one is tough because it’s always going to be a risk. What you purchase the plot for now it will inevitably have lower taxes than when you build on it, that is a given. As you improve the land and build on it, the city will reassess and raise taxes. In order to best offset surprises, I recommend reaching out to the assessor early on to get an idea of roughly what a house on that size of land would assess for today if it had a specific square footage. It won't be exact, because taxes do continue to go up over time, but it will give you a starting point. Also know that all taxes are reassessed when sales happen in general so to be safe, I might estimate 15% higher in those costs just to ensure that buffer room.


Budget for Taxes


If a property has recently be subdivided into smaller plots, that adds additional tax complications as well. The owner of the larger plot of land usually is on the hook for the taxes until the subdivision has been completed. So you may find them wanting to negotiate more in escrow for those taxes that will then be due later after you close. It can get super complicated so higher a good lawyer who is qualified and capable of dealing with more complex transactions. It will save you more money in the long run.


Proximity to Preferred Builder. The final tip I will leave you with is making sure your plot of land is within the distance that your builder is willing to build. Depending upon the size of the builder's business, they may be able to travel further or they may be hyper local. If you have someone in mind that you really want to use, ask them upfront how far they are willing to drive should you buy a plot of land. I know lots of builders that will not travel more than 30-45 minutes from where they are centered. And they have their reasons for doing this. Aside from the obvious of a longer daily commute to work, many have relationships with local sub contractors and prefer to use them. So just double check before you sign on the dotted line.


New Build by Catskills Energy Homes


So now what do you do once you have found the plot and have an accepted offer?


Well, you will have to check back next week for that post. In the meantime, happy hunting!


Forever grateful,

Mack


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