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How to Buy Land and Secure Loans

Four Factors that Make or Break Land Investments

There are plenty of factors that go into choosing the right steel building for your needs. Size, cost, location – the list goes on and on. But before you make decisions about the building itself, you might need to consider the land where you’ll be erecting the building. Purchasing land for your new building is an intensive process that requires a lot of research and careful decision-making.

Here’s four factors that outline how to buy land for your steel building.

How to Buy LandFactor #1: Is It Buildable?

Land investments are obviously huge decisions, which makes a quality evaluation the cornerstone of any savvy purchase. The first thing you should know about purchasing land is that local laws will dictate much of the buying process, so it’s important to have a firm grasp on what your local government requires before purchasing land. One of the requirements is that the lot falls under the government’s definition of “buildable”, which can vary from one city to the next. A buildable designation means that all government entities have given permission to build on the desired site. It’s important to note that just because a lot has been deemed “buildable”, doesn’t mean it’s an ideal, or even good, place to build. That can only be verified through your own research.

Buying the Right Parcel of Land for Your Project

Before digging in deep, start with your ideal vision for your steel building kit. How tall will it be? Which direction will the building face? How many rooms? Do you need extra space for storage, vehicles? Once you’ve locked in your vision, a preliminary look at the land will give you an idea if it’s the right land for your building. A simple way to start your research is by using an online tool that allows you to virtually place and measure your building, like the tool featured below. If your preliminary research seems to check all of the boxes, it’s time to move on to more concentrated, independent research.

Buying Land? Measure it First!

Find Out What Size Building Works

Determining what size building will work is one of the most important feasibility tests to conduct before you buy land. You must consider not only the size of the lot you plan to build on but also how much of it the city will let you build on according to the setbacks.

To find out what size building will work on the property you have in mind, simply type in your address, click zoom and then place your building after entering the size.

Note: This app works best on a desktop or tablet device

Other Preliminary Factors to Consider Before Buying Land

It’s important to consider not only the land on which you will be building, but also the surrounding property and community. Is the community set to expand, and will increased traffic affect your operations? Do you need privacy? Are there any conflicts that could arise with neighboring businesses or residents? These are all things you should be asking yourself before purchasing land.

Factor #2: What’s the Zoning?

A lot of research will be required to properly navigate all that is related to zoning. Zoning refers to government ordinances that regulate the use of land as determined by a local board. The board or “building committee” hopes to establish a set of goals that make sense and ultimately benefit everyone in the community.

The board establishes specific zoning districts, which are then divided into smaller sub-districts. You can find out which zoning district your desired land sits in by looking at city websites, but we recommend going to city hall in person, where you can pick up a map and speak to city employees and officials. They may have greater insight into the property and future of the community.

Each zoning district comes with its own set of guidelines and restrictions. Here are a few you should be familiar with before purchasing land.

Did You Know?

If you need help planning your project our pre-construction might be exactly what you’re looking for. In addition to floor plans, 3D renderings and a complete A.I.A. certifiable cost analysis our team will determine exactly what you can build according to your local zoning restrictions.

Pre-Construction Services

Setback Requirements

A setback refers to the distance required between your building and any place that requires protection, including streets, bodies of water, property boundaries, public utilities and any other place deemed necessary to protect according to the law. Setbacks can include not only your building, but also fences and landscaping, among other property features.

Purchasing Land for Your Steel Building

Lot Coverage

Lot coverage generally refers to a percentage of the lot that is covered by the building. Many zoning districts calculate lot coverage differently, so once again, be sure to know your district’s standards.

How to Calculate Lot Coverage

Here’s how you would calculate the total lot coverage if you had an 8,000 square foot lot and wanted to build a 50′ x 100′ metal building with sidewalks and a driveway.

ProjectSquare Footage
Steel Building5,000 sqft
Sidewalks325 sqft
Driveway400 sqft
Total Lot Coverage5,725 sqft

Total Lot Coverage / Lot x (100) = 71.56%

Physical Restrictions

Some physical landscapes are regulated or protected for a variety of reasons. These include wetlands, flood plains, historical sites and land home to endangered species. These landscapes are regulated because they pose a significant risk to potential builders. Check with local government officials to assess the risks and consider solutions or alternatives.

Buy Land for Your Metal BuildingFactor #3: How Much Does it Cost?

Once you’ve finished all of your research, and you’ve decided on a piece of land, it’s time to make a bid. All of the information that you’ve gathered has helped you make this decision, but it has also equipped you to make a knowledgeable and respectable offer. If you’re comfortable writing the official bid yourself, you are free to do so. But due to the complexity of land investments, we recommend hiring a lawyer to assist with the paperwork and official bid process.

How to Use Earnest Money

One way to get the attention of a seller is by putting forward earnest money during the bid process. Earnest money is a relatively small amount of money put into an escrow account, usually 2-5 percent of the total value of the property. Earnest money indicates your level of interest in the property and can be a valuable bargaining chip for a highly contested piece of land. However, if for some reason you don’t successfully close on the deal, the seller has the right to keep the earnest money.

Avoid Losing Your Earnest Money by Outlining Your Contingencies

One way to avoid forfeiting your earnest money is through the use of contingencies. Contingencies are stipulations and questions, put in writing on the bid, that establish expectations that must be met before a sale is final. Contingencies allow the buyer to make more informed decisions and protect them from forfeiting earnest money. Once again, these stipulations and questions should be written with the guidance of a lawyer.

Example Contingencies
  • Zoning: If the land you want to purchase is currently zoned residential and you are working with the city to rezone it to commercial, the land purchase can be contingent upon the city changing the zoning to commercial.
  • Subdivision: This contingency also falls under zoning. You may want to buy land, build your building on part of it and then subdivide the rest to be resold.
  • Financing This is perhaps the most important condition. Make sure your land investment is contingent upon you successfully securing an affordable land loan. If written into the agreement carefully by your attorney, you may reserve the right to back out of the purchase for something as small as an undesirable rate.

Factor #4: How Will I Pay for It?

Land investments often require financing. Here are a few options when it comes to land loans.

Big Bank Land Financing

Loans for undeveloped land are riskier investments for large financial institutions, but some big banks are willing to finance the process. You are more likely to be approved for a loan if you’ve done all of the research (and more) that we listed above.

Local Bank Land Loans

Once again, it’s all about risk for these institutions, and local banks are usually more risk-averse than big banks. But that doesn’t mean they won’t finance your land purchase, or give more favorable rates than big banks. If you’re applying for a land loan from a local bank or credit union, recognizing how the community fits into your plan can give them peace of mind.

Owner Financed Land

Financing through the seller is a common option because it offers the most customizable, flexible plan. This option will require a sizable down payment.

How to Get Starting Buying Your Land

As you can see, a couple of the most important factors in purchasing land are doing your homework and being prepared to offer your vision for the property. These signal to the sellers, real estate agents, lawyers and lenders that you’re serious about buying land and ensures you receive the best deal possible.

Need Help? General Steel Has Solutions

Building expert, Lauren McCain, shared a couple of advantages that General Steel offers in navigating the sometimes confusing buying process. “Buying land is a tricky subject,” McCain said, “but we’re willing to help where we can. Once a customer locks their building pricing with a deposit, we provide engineer-stamped drawings that can inform local building departments, and hopefully help a customer get their building approved.”

  • We provide engineer-stamped drawings that can help get your building approved.

McCain also singled out General Steel’s design services team as a useful resource when buying land for a steel building. “Our design services team is a good fit for people that need help figuring out setbacks and the intricacies of property value. They also do a site and code review of potential properties, so customers know which size of building would work best at each property.”

If you’re looking for metal building prices, or want to discuss the potential of your new steel building, contact us at 1-800-745-2685!

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