Three Imperatives For Purchasing Land

Given our current environment, it almost seems counter intuitive to buy land to build on when there are so many existing builds on the market. Factor in today’s terrific prices and it’s even more of a dilemma. So why would anyone want to buy land today? A major reason is that some purchasers can’t find the building they want, in the right location, with the right characteristics. That leaves little recourse but to purchase land. And, simply put, a good tract can be a great buy today.

Over the past few years, many parcels have fallen into the hands of the lenders and are now on the market at beneficial prices. If you are considering such a purchase here are three imperatives about the property you should know before you buy:

How is the property zoned? Is the property zoned for your intended use, such as a medical office building or retail store? If it is, reconfirm that fact in writing with the municipality. There may be a modest fee to get this letter on County/City letterhead, but it will be well worth the cost and effort in the long run. If the site is not zoned correctly, assess the probability of success in a rezoning. Chances are if the neighboring lots are used in a similar fashion, there will be little resistance from the neighbors and the municipality to rezone the subject lot.

How much of a building can you build on the site? Depending on zoning, location, wetlands, and flood zones, can you fit your desired building and related parking on the site? All zoning districts have a maximum floor-to-area ratio that they allow. It’s important to note that this is the first calculation you should do. The total square footage that can actually fit on the site will be modified once you look at the wetlands and flood zone implications. Plus parking, retention and access to the main arteries have a significant impact as well.

What are the prior uses of this tract? Is there an environmental Phase I study available? Many infill sites were once used for another purpose and that prior use may imply some level of potential soil or ground water contamination. This sometimes applies to vacant land, never used, or agricultural land. Having a Phase 1 is often a requirement of a lender. But even if it isn’t, I strongly suggest a Phase 1 as an insurance policy for down the road. Phase 1’s look at the 50-year history of the land, prior owners, prior uses (including tenancies) and surrounding properties that may have an environmental “flag” associated with them, such as a gas station with underground storage tanks. Most likely the report will provide a good result and you can feel confident in the purchase. Plus, if there were ever a question about the property in the future, you have a report that provides a good benchmark of its condition when you bought it.

I enjoy the building aspect of commercial real estate and have completed dozens of buildings in my development career. If the purchase of land is in your future, please feel free to contact me with any thoughts or questions you may have.