Land ownership offers more than just open space it’s a lasting investment that can align perfectly with your unique vision. Maybe it’s a state you’ve visited and loved, like Utah, California, or Texas, where you envision returning in retirement. Perhaps you’re dreaming of a second home in the mountains of Colorado, a coastal retreat in Oregon, or even a family compound or a commercial venture.
Whatever your purpose for buying land, the first question to answer is whether to buy undeveloped or developed land.
Undeveloped land, also called raw land, has no man-made improvements such as utilities, roads, or buildings. Think of it as a blank canvas, ready to become whatever you envision, such as:
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Passive income by renting to farmers, ranchers, hunters, campers, or mobile home dwellers or building storage facilities or paid parking spaces.
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A recreational spot for family or guests, with space for ATVing, dirt biking, hiking, and more.
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An investment to hold onto, ready to sell when the price is right.
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The perfect site for a primary or vacation home.
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A foundation for a commercial or industrial project.
Undeveloped land is zoned and taxed like any other property. Don’t assume that designations like R1 mean the same thing in each jurisdiction. R1 could mean zoned for residential use or as rural land. Ensure you explore costs to clear the land and run utilities, as well as building costs for personal or business use. In addition, the land you want to buy could have other zoning restrictions (e.g. environmental or aesthetic) which means you’ll have to honor and protect native habitats and adhere to environmental protection laws, or make the home or building you want to build meet criteria such as height, size, materials, architectural style, and other criteria.
Developed land has buildings on the property, or at least includes utility lines that have been run to the property. In short, developed land is ready for building or occupancy. However, you still have to do your due diligence as far as zoning goes, especially if you want to create an enterprise that differs from the current use of the land.
Of course, the cost will depend on the location of the build, the size of the home, the complexity of the layout and the materials used. If you’re building the home on undeveloped land, there are additional expenses you’ll incur that you’ll need to plan for, including:
- Clearing and grading the land
- Building an access road
- Environmental testing
- Additional permits
- Building access to utilities (e.g. water, natural gas, sewage)
As you shop for properties, consider numerous factors, including:
- Cost and comparables – Are you buying land for passive investment such as a hunting lease or for use as a homestead or vacation home? Are you able to find similar properties in the area that have recently sold so you know the going rate?
- Land availability and proximity – Is the land close by so you can supervise development? Is it close to towns and services like hospitals and restaurants or do you prefer something more rural?
- Local economy and job market – Will you need personnel to help you operate the property?
- Tax rates – States and counties calculate property taxes by applying a mill rate, which is a tax rate per $1,000 of assessed property value. This assessed value is derived by applying an assessment ratio (the portion of the property’s market value subject to tax) to the property’s market value.
- Quality of schools – Do you have children who will attend the schools? Do you plan to rent to families with children?
- Local Amenities – Are there attractions nearby for you and your family to enjoy or to entice people to your development, like ski resorts, state parks, lakes, or oceanfront? Can you get the services you need such as schools, hospitals, police,e and fire departments?
- Climate – If you’re looking at property in areas you’re not familiar with, you’ll find that climate impacts prices, land use, insurance, building schedules, and much more. Are the average temperatures suitable for the type of property you want?
- Zoning – You may be surprised to learn that the land you want isn’t zoned for your purposes. How easy will it be to get it rezoned residential, commercial, or industrial? Historical, environmental, or aesthetic? You’ll need to verify local ordinances for the property before you buy.
- Access to utilities – If you want to build on the land, you must determine whether they’re within the local service area, or pay to connect them yourself. If the land you want doesn’t have utilities, you may need to have them installed yourself but your land will be more valuable for it.
- Infrastructure – Are there easements to contend with and are roads available to reach the property so you can build?
- Natural features – The property you want may have beautiful views, babbling brooks, and stately pine trees, but those features should be considered if you’re planning to build. Sloping property is more difficult to build upon; soil that’s rocky is more expensive to clear; and sandy soil shifts, causing foundations to crack prematurely.
Now that you know what to do, where should you look for land? Again, it depends on your priorities. In 2023, some of the most affordable states for average-priced farmland per acre were in the Mountain West some of which include desert areas such as New Mexico ($610), Wyoming ($880), Nevada ($1,060), Montana ($1,070), Colorado ($1,950), and Utah ($2,940). In the Southern Plains, good deals can be found in Oklahoma ($2,450) and Texas ($2,900). For pastureland, consider the Northern Plains, where Nebraska ($1,440), North Dakota ($1,070), and South Dakota ($1,340) are among the most affordable options.
The top five winners for average cheapest land for homes per acre are Arizona ($4,200), New Mexico ($6,000), Mississippi, ($10,800), Colorado ($11,600), and Arkansas ($11,600).
But when you include property taxes, the landscape changes. Texas, for example, has the sixth highest property taxes in the nation at 1.68%, while Nevada’s is 0.59%, Utah’s is 0.57%, and Oklahoma’s is 0.89%.
Costs per acre and property taxes don’t tell the whole story. Aside from local county taxes and sales taxes, there’s the cost of living. In a comprehensive study, U.S. News and World Report, researchers found that Arkansas, Mississippi, and Alabama had the lowest cost of living but ranked among the lowest in overall state rankings at #47, #48, and #44, respectively.
The state rankings are based on how “well states are performing for their citizens”, with metrics including health care; education; the state’s economy; roads, bridges, internet, and other infrastructure; public safety; the state’s natural environment; its fiscal stability; and the opportunity it affords its residents. Ranked best overall were Utah #1, New Hampshire #2, Nebraska #3, Minnesota #4, and Idaho #5.
