Have you always envisioned building your own home, or are you frustrated by the current housing market’s lack of inventory? You’re not alone. According to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, over 1.8 million building permits for new residences were issued in March 2022—a 6.7% increase from March 2021.

If you’re ready to build a house, the first step is securing a place to build it. Here’s everything you need to know about buying land for your dream home.

How to Find the Right Lot

Finding the perfect piece of land can be challenging. How do you locate a lot that fits your budget and is in a desirable location? Driving around to look for signs or searching online for “land for sale” can be fun and sometimes effective. If you’re interested in a new-build development or master-planned community, you might find plots of land included with home purchases, and sometimes you can buy the land to build your own home.

For those seeking raw land, working with a real estate agent who specializes in land sales is the best approach. The Realtors Land Institute is a good starting point, offering listings and a search tool to find accredited land experts. Look for local agents with the ALC (Accredited Land Consultant) designation. Make sure any expert understands your location preferences and building requirements, especially if you’re seeking specific views, like water or mountains. When buying for a view, ask your agent to check for any planned developments that might obstruct it.

Another option is buying a teardown house for the land or looking for homes on large lots that can be subdivided. Contact the owners to see if they are interested in selling a portion of their land.

What to Consider Before Buying

When buying land, consider your lifestyle and how the lot will fit into your overall expenses. Typically, land costs account for 25 to 35 percent of your final home value. Here are key factors to consider before making an offer:

Zoning

Ensure the land is zoned for residential use. Some properties have legal protections or restrictions. A local agent can help you understand zoning regulations and avoid wasting time on unsuitable land. Common restrictions include maximum lot coverage, elevation limits, accessory structure limitations, and minimum and maximum building areas. Working with an architect who can create a 3D model of your home on the lot can help visualize the impact of these regulations.

Size

Choose a lot size that meets your needs. For large families or those who enjoy entertaining, a bigger lot may be necessary. Even for smaller homes, you might want an expansive lawn or garden. However, larger lots can incur additional expenses, such as higher landscaping and watering costs. A soil analysis can determine if the land supports your gardening plans.

Privacy

Consider how much privacy you want. Secluded lots away from busy roads and natural barriers like trees, bushes, and water features can provide privacy. If the property has a stream or pond, check for regulations and flood risks.

Utilities

Check the availability of utility services. In populated areas or new developments, utilities are usually accessible. In rural areas, you might need to hook up electricity, water, and sewage, which can be costly. Ensure the lot is large enough for a septic system or well, if needed, and verify any necessary permits with local utility providers.

Accessibility

Consider how you’ll access the property. Land purchases often occur outside cities, leading to long drives and rural roads. Assess the need for building access roads or driveways, which can be expensive. Factor in gas costs and commute times.

Ecology

Consider environmental concerns. Some land, particularly in rural areas, may have conservation requirements or building limitations based on slope or tree removal. Soil tests and water table checks are crucial. Hiring a property surveyor can help investigate land rights and restrictions.

Financing a Land Purchase

Financing land is typically more expensive than financing a home due to higher risks. If possible, paying cash is the best option. Otherwise, consider local banks or credit unions, which may offer local land loans. For primary residences in rural areas, government-sponsored USDA loans are an option. Shop around for the best rates and get preapproved before making offers.

Preparing Land for Construction

In most places, you’ll need a building permit from the city or county. Ensure you have the permit before starting construction. Clear the land of natural obstacles with professional tree services familiar with local regulations. Remove deadfall and debris with a chainsaw or commercial stump grinder. Eliminate hazards like wires or pipes, and enlist local utility companies to avoid damaging infrastructure.

Survey the property to determine boundaries, which can save future disputes. Surveyors may also work with builders to ensure the land is properly leveled before construction.

Bottom Line

Buying land for building a home requires thorough research and planning. Ensuring the land is suitable and understanding permitting and zoning issues are critical steps. Working with a professional can help navigate the complexities, giving you a solid foundation for your dream home.