35 Things to Consider When Buying Rural PropertyNov 04, 2020
When Buying Rural Property, how do you find the right place?
I purchased a 46 acre property over 20 years ago that I considered to be my dream property. I had always wanted to build a log cabin and establish a homestead that was completely off-grid. That is exactly what I did. I still have that property today and still live there full-time. Fortunately for me, things worked out well despite my lack of forethought and planning.
At the time I also had a complete lack of understanding of all the possible considerations for buying rural property. I made many, many mistakes. It was only the second piece of real estate I had ever purchased in my life. When I found this place, I knew it was exactly what I wanted and I jumped at the opportunity.
Because I did not have a lot of money at the time, I took a significant financial risk. Fortunately the people I dealt with were honest, extremely helpful, and willing to risk placing their trust in me. Only in retrospect did I realize just how much of a risk I had taken and that is what motivated me to write this article.
Are You Considering Buying Rural Property?
If you are considering a simpler lifestyle in which you are self sufficient and perhaps even off-grid, I think you will benefit from this information on buying rural property.
Many folks who live off-grid do so in a rural setting. However with modern technology and intensive gardening techniques, it is very, very possible to reach a high level of sustainability and never leave suburbia. Consequently, if your present property suits your needs, goals, and lifestyle choice, then focus on that. You will save yourself a lot of time and money.
If this is not the case, or you do not presently own real estate, then you may have to make the decision to relocate. That decision alone brings up a host of different considerations, which will be addressed below.
As you read through this article on buying rural property, always remember that each and every situation is completely unique. You must always practice due diligence. I have attempted to make the following list as inclusive as possible and place things in a logical order.
This post is categorized as follows:
First Things First
These are the first things you need to consider before you even begin your property search.
Be Prepared By Doing Your Homework
As you start considering different properties, the second section of this article discussed things that could easily be “deal breakers” . These are the things that will help you decide whether or not to even spend your time viewing a certain property. It will also help you make the decision on one property versus another.
Logistics and infrastructure considerations for buying rural property
Water, sewer, electricity, property access, and many other things.
I hope you find this information helpful and informative.
First Things First
1. LIFESTYLE CHOICE
More than anything else, the type of lifestyle you want to establish will be the pivotal factor for many other decisions. I strongly recommend that you think very carefully about this one thing before making any other decisions.
Consider the following:
- What level of self sufficiency do you want to achieve?
- What percentage of your food do you want to produce?
- Do you want to live in suburbia or in a rural area?
- Do you want to be tied to the grid or completely independent?
- Do you want a get-away off-grid place or live there full-time?
- Do you want to take the time to slowly develop the property and then move there full-time?
Can you afford to purchase a second property and financially support the needed development while maintaining your present residence? Can you continue to do so until you sell your present place. How much can you afford for a down payment and do you need to save additional money? Do you also have sufficient funds set aside to start improvements on the other place if it will not be your full-time residence for a while? Will you pay cash or do you need to consider a mortgage?
3. GEOGRAPHIC LOCATION AND CLIMATE PREFERENCE
These things go hand in hand and are important pivotal factors. These two things in many ways will dictate lifestyle, housing options, gardening techniques, and even available options and types of renewable energy.
4. DON’T BE IN A HURRY
If you are looking for the property of your dreams, the last thing you want to do is rush into any sort of major decision. When buying rural property, take your time and make sure you get what you want. It is going to take some time and effort to see what is available and consider all of your options before making a decision. Also, taking more time allows you to save more money. The last property I purchased was after 3 years of looking and I found exactly what I wanted.
Be Prepared By Doing Your Homework
5. TRUST NO ONE
This may seem like a harsh or unusual thing to say right out of the gate. But I cannot possibly over emphasize due diligence.
There are a lot of wonderful hard working professionals that may in fact be your best friend and make it their mission to give you great service. However, not everyone is honest. People are out to make money and may have a tendency to steer you toward properties that will give them a greater commission. Also remember that people are not perfect and simply over look things and make mistakes.
No one is going to look after your interest better than you are. Ultimately, it is your responsibility. Take the extra time to ask a lot of questions and look things up on your own.
6. PROTECT YOURSELF
Once again, ultimately it is your responsibility to know exactly what you are getting yourself into. If you are looking for your dream property, make sure you are getting exactly what you want. Meticulous due diligence is your first priority especially when buying rural property. Make sure you do not get any unpleasant surprises down the road.
If you put down earnest money make sure that money goes into an escrow account and will be returned to you if your contingencies for final sale are not met. Make sure you do a title search which will tell you the legal history of the property. Make certain your earnest money agreement covers timber, water, and mineral rights AND it requires the seller to deliver a deed conveying good title.
If there is a mortgage on the property, get it in writing that it is being paid or that you are assuming that mortgage. Otherwise, if it is not being paid, the holder of the contract or mortgage has prior claim to the property.
7. FINANCIAL CONSIDERATIONS
If you can make a cash purchase, this is always the best way to go. However, most people will have to use some form of financing. If you are buying undeveloped land, most banks will require a much higher down payment which gives them a bit of collateral in case you abandon your project.
Be sure to develop a relationship with a lender that is familiar with loans on rural property. They are much more familiar with the unique challenges of rural properties and usually have contingencies to roll things over into a construction loan when the time is right.
I strongly recommend obtaining conditional pre-approval because this will narrow down the price range you can pursue and will save you a lot of time, effort, and even money before you begin to look at properties.
8. PURCHASING RAW LAND VERSUS PROPERTY WITH EXISTING STRUCTURES
If the property is going to be your primary residence immediately, then purchasing something with an existing structure may be the way to go. However, if you have the time and skill to build a small cabin while living in another place, you can save yourself a considerable amount of money.
When I initially purchased my land, it took me about 5 months of construction work to get the cabin to the point that I could move in. Once that was accomplished, I could easily make improvements as I went along.
You also need to keep in mind that when you are purchasing undeveloped land, it may come with some restrictions, such as how much timber you can remove or the amount of clearing you can perform until the property is paid off. I have seen some cases where people purchased land with valuable timber, sold that timber and essentially clear cut the land, then defaulted on the loan.
9. USE LOCAL EXPERTS
Whenever possible it is highly recommended to use local realtors and bankers. You may not feel this way when purchasing property in a subdivision. But when buying rural property, local realtors not only know the history of properties in their area but also know the local market and comparable sales.
Local lenders such as Farm Credit understand the ins and outs of loaning on rural properties and will structure the loan accordingly. Many times they also have established relationships with local attorneys, excavators, well drillers, and many other professionals that can help you to develop the property.
Many of these people have lived and worked in the area for most of their lives. They can be very, very helpful. Consequently, these professionals can offer advice and assistance and potentially help you avoid costly mistakes.
Go local whenever possible.
10. CHECK OUT YOUR POTENTIAL NEIGHBORS
Unless you purchase property in a remote area, to some degree you are going to have to deal neighbors. This can be a good thing if they are like minded people. Take the time to introduce yourself to your perspective neighbors and establish a good relationship with them.
As I like to say, the best time to make a friend is when you don’t need one. Sooner or later, you are going to need help with something and so will your neighbors.
If you want to take it a step further, check into any criminal history of your neighbors. Maybe this sounds a bit over the top. However, if someone close by has an unpleasant criminal background, that can be a good indication of their personality type. This in turn can be a direct indication of how easy they are to deal with especially if there is some sort of conflict. Consequently, it may affect your decision to have them as a neighbor.
Use your best judgement on this subject.
11. BE AWARE OF YOUR SURROUNDINGS
Fortunately, modern technology makes this so much easier these days. If you are considering buying rural property, bring up a satellite view of that property and the surrounding area. This can reveal a lot of things that would normally be blocked from view by trees and other obstacles as you stand on the property.
Does the property border a major roadway, railroad, or industrial area where you will have to contend with noise and pollution? Are local waterways nearby with potential flood plains? Are there large scale agricultural operations nearby? If so, has there been heavy use of pesticides in the past that could affect the quality of your ground water? If there are livestock operations, is the odor going to affect you and are you willing to deal with it?
I once viewed a very nice piece of property on top of a mountain that was directly down wind from a large pig farm. All you could smell was urine and feces. Consequently, I did not purchase the property
It is also a great idea to do some ground work by driving around the area to check out the condition of surrounding properties. This will give you an idea of how others take care of their property. The care of their property is a direct indication of whether or not they take pride in ownership.
Check local tax records to see how often properties have changed ownership. This is an indication of the stability of your community. In the end, this type of simple research will help you make the decision of whether or not to trouble your realtor with setting up a showing.
12. ENVIRONMENTAL FACTORS
One of the primary concerns for any potential property you want to purchase is the presence of any sort of contamination. The federal government holds property owners accountable for clean up of environmental contamination even if it occurred before purchased the property. (See the section on title insurance.)
The next two areas of concern are whether or not the property is designated for endangered species and if the Department of Natural Resources (DNR) has placed any special classifications on the property, such as designated wetlands. If either one of these conditions exist, it may place considerable restrictions on how you can use the property. For example, it may make a difference in whether or not you can clear brush, build structures, and even harvest and sell timber.
13. ZONING AND CODE RESTRICTIONS
To be sure you can use your property the way you want to, you need to be familiar with local codes and restrictions. It is also important to know if the property is zoned agricultural, residential, or commercial. Consider how these restrictions and zoning will not only affect your use but also affect how future buyers may view the property. Visit the local planning and zoning commission and get to know them. Speak with some of the local property owners and get a feel for how easy it is to deal with that commission.
In general, more rural counties have less of a tax base to support a zoning and planning commission. Consequently, when buying rural property in these areas, it usually means rules and restrictions are more lax or no one is in place to really enforce those rules. Consequently, within reason you can do what you want as long as you are not creating a nuisance and no one is complaining. Proceed at your own risk on this one.
Even when buying rural property, in some states it is illegal to live off the grid. Sometimes only specific counties have restrictions on such things. Another approach would be to purchase unrestricted land. This can be both good and bad. Your neighbor could easily start some sort of agricultural operation where you have to deal with the odors, noise, and pollution. They could also clear cut and sell off of the timber. Or they may do something else to ruin the appearance and now you have to look at it all the time.
Consequently, some restrictions on land use can be in your favor. This is up to you to decide.
14. HAZARDOUS CONDITIONS
This is something that a lot of people over look. But, you might want to stay away from nuclear plants, earthquake faults, tornado prone areas, drought prone areas (not only for reasons of available water but also risk of forest fires), low lying areas (flood plains, hurricanes, and tsunamis), or areas prone to any other extreme weather conditions (high wind, extreme cold, very little daylight in the winter).
15. RECREATIONAL OPPORTUNITIES AND OTHER NATURAL RESOURCES
No property is ever going to be 100% perfect and provide absolutely everything that you need. Consequently, when buying rural property, it can be very beneficial to have other natural resources close by. Things such as lakes, rivers, mountains, wilderness areas, and parks can provide numerous recreational opportunities. These areas can also provide opportunities for hunting, fishing, and foraging. If you are trying to be as self sufficient as possible, do not over look the value of having such resources easily available.
16. HOMEOWNER’S INSURANCE
This is an important point that can blind side most people, as it did me. There are a fair number of insurance carriers that will not write policies on properties outside the city limits. It is important to check with local realtors and with Farm Credit for recommendations of insurers that deal with rural properties.
Also consider how the location and property features can affect your insurance rates and whether or not you can even get insurance. There are numerous things that can affect your insurance rate. The presence of old buildings and barns, whether or not a wood stove is used for heat, the distance from a fire station or hydrant, the age of the house, whether or not you will have livestock are just a few things to consider.
My best advice is do not purchase a property where you cannot afford the insurance premium. If you are in a situation where you cannot get insurance, are you willing to limit your risk by limiting the amount of development you do?
17. DECIDE ON A BUDGET AND COST OF OWNERSHIP
Ultimately your budget constraints are going to be a huge deciding factor in the type of property you purchase, the size of that property, and whether there are improvements or not. Do not underestimate the value of any improvements. Sheds, barns, fences, livestock corrals, etc., can be expensive to build.
Be aware that once you purchase a property, generally that is only the beginning. Beyond the initial purchase, your future investment into the property will depend largely on the type of property and your reasons for buying. You may have to drill a well. You may also have to run water and electrical lines in as well. You also have to factor in the costs of insurance, on-going maintenance and other things such as road improvements.
You may have to either contend with utility bills or the costs of renewable energy installation. Depending on the type of property you may need to purchase an ATV, UTV, tractor, four wheel drive vehicle, trailer, and other equipment. There are also many smaller tools such as chainsaws, water pumps, air compressors, construction tools, etc. And do not forget the cost of building your primary residence.
18. RESEARCH THE MARKET BEFORE BUYING RURAL PROPERTY
It is very important to research the market where you are considering a purchase. If local prices are rising, owners will tend to overprice their property hoping that they will catch the upward trend. Keep in mind that this does not necessarily reflect the prices at which properties are actually selling. This is another reason why it is important to find a local Realtor that knows the market and can locate comparable sales. Be sure to also review the local multiple listing service.
19. WATER SOURCE
The availability of water, or the cost of bringing it in, can be a deal breaker so pay close attention. I have come across a lot of rural land that actually comes with city water to the edge of the property. But many people will have to drill a well. If you have to drill then talk to local property owners about their wells. What is the average depth to find water? What is the average gallons per minute production? What did they pay to have their well completed? Do they have a recommendation on a local driller?
Investigate the water quality specifically for sediment, contaminants, or dangerous chemicals. Investigate how the surrounding properties have been used in the past, such as feed lots or any other commercial agricultural operations, factories, mining, etc.
If there is a water source to the edge of the property such as city water. That can be to your advantage. It also means you will pay a fee to tap into that water. If you have a stream on the property is it part of a municipal watershed. If so, it may in fact be illegal for you to use the water for any reason. Also be sure to check into any restrictions on rain water collection.
20. DRAINAGE AND SEWER
First familiarize yourself with local zoning requirements.
Outhouses are illegal in some areas. In others, you are required to hook up to the local sewer system. If a septic system is required, be sure to have a percolation test performed to determine if you can in fact install a septic system. (See the section on percolation tests, #23 Soil Conditions.) If there is an existing residence on the property with a septic system, make sure the system is in working order. Is the size adequate for your intended use? You should also check to see if local ordinances allow for compositing toilets.
21. LOCAL INFRASTRUCTURE
Most folks that want to live off the grid are looking to decrease their dependence on the infrastructure. Others may want to live in a rural area and simply be much more self sufficient. Whether you want to live completely unplugged or not, it is still advisable to look into what services are available. You just may change you mind at a later date. Therefore, it is advisable to check into the availability of water, sewer, electricity, cable television, and high speed internet services.
It is important to have some form of communications unless you truly want to live completely isolated. Sooner or later you may have an emergency situation and need to contact someone for help. Check for cell phone reception in several areas on the property to make sure it is available.
I had my off-grid property for almost 20 years with no cell phone reception. I did have access to a phone 1/2 mile away. I can tell you, once I actually had service at the cabin, it was a very nice convenience. I only turn the phone on when I want to use it but it is nice to know it is there in case of an emergency.
If you plan on having internet access, investigate this very carefully. I learned the hard way that if you want to know the truth about your service availability, you have to bypass the sales folks and talk directly to the service technicians.
23. SOIL CONDITIONS
Make sure the soil is of proper condition to be used for what you want. If you are planning on gardening, have a soil test conducted on the specific area where you plan to garden. If the soil is too rocky, too acidic, too sandy, or is contaminated with chemicals from a previous owner, it may not be suitable for gardening.
Percolation test: (Also known as a perc test) This is used to determine if the soil is suitable to sustain a septic system and is required by most county health departments. It is usually required only when there is NOT access to a municipal sewer system.
Waste water from the household is trapped in a leach field and eliminated primarily through percolation. The size of the septic system is determined by the expected volume of waste water, which is related to the size of the proposed residence. It would be advisable to get an estimate of the cost of installation of a septic system.
24. PROPERTY ACCESS AND EASEMENTS
Due diligence, due diligence, due diligence!!
First of all, make sure you have legal access to the property. I have come across some unscrupulous folks that sell land without the buyers having legal access. If your easement is across someone else’s property, make sure that property owner is a reasonable person.
Look carefully into any legal easements across the property you intend to purchase, such as gas, electric, and neighbors. Having you own private road is a good thing. But I also know from personal experience that maintaining that road can sometimes be costly and snow removal means additional equipment and expense.
25. ACCESSIBILITY OF GOODS AND SERVICES
Even self sufficient folks need access to basic supplies and certain repair professionals. Get to know exactly what local resources are available such as rural lenders, banks, mechanics, plumbers, building supply outlets, ranch and farm supply stores, etc.
You also have to consider the distance, time and travel expenses to and from the nearest town in order to obtain those services. And more importantly for some people the availability of certain services such as emergency response personal, a local hospital, a trauma center, and fire stations are non-negotiable.
26. PROPERTY TAX ADVANTAGES
Agricultural tax relief programs are geared toward lowering the taxable value of land used for agricultural production. Every state offers some type of program. Check with your local assessor’s office to see if your property qualifies for any special credit, exemption, etc. If there is a pre-existing tax exemption, familiarize yourself with the necessary steps to maintain that status. Often times when buying rural property, you can find larger parcels so it is too your advantage to keep your taxes as low as possible.
27. ESTABLISHING BOUNDARIES WHEN BUYING RURAL PROPERTY
When you purchase a property in an established suburban area it is fairly common to forego the survey, unless there is some sort of dispute, question, or you specifically request it. This is because the boundaries have long been established,
However, when buying rural property, you should insist on a survey. When someone is selling a property, they will ensure you a legal description but they may not ensure you the exact acerage. The only way you will definitely establish this is to have a survey performed. This way you can make sure you are getting exactly what you are paying for.
Take the time to visit the county assessor’s office and have them pull the property information and see how many acres are being taxed. If this information does not match closely to what the owner or realtor is saying, then you need to ask why and do some further investigation.
28. TITLE INSURANCE
The title to a piece of property is evidence that the stated owner is actually in lawful possession of the property. Title insurance protects real estate owners and lenders against any potential damage or loss they may experience due to liens, encumbrances, or defects in the title of the property.
Each title insurance policy has specific terms, conditions, and exclusions. It protects against claims such as fraud, forgery, liens, encroachments, easements, another person claiming ownership and any improperly recorded documents. Title insurance is different from auto or health insurance. With these types of policies you pay a monthly premium and the insurance protects you from future events. Title insurance is a one-time premium and protects you from things that occurred in the past. For example, if the property was used as a site for dumping waste.
Be sure to read the title policy and understand exactly what it says and have this transaction recorded at the public registry.
29. WHAT’S INCLUDED IN THE SALE?
Buying rural property can be more complex than you think. It is extremely important that everyone involved in the sale understands exactly what is included in the transaction. That information needs to be put in writing. Have a detailed list of anything you feel you are buying such as feeders, sheds, livestock panels, gates, fence posts, miscellaneous equipment, treatment or removal of any existing hunting or farm leases.
30. FEATURES OF THE PROPERTY
Pay close attention to the features and characteristics of the property. Is the land flat, rocky, hilly, or sloped? Does it drain well or stay wet a good portion of the year? Are there several potential building sites to choose from? Is there decent southern exposure in order to install renewable energy sources such as solar? Are the features of the property such that you can use the land the way you intended?
When buying rural property, don’t make the mistake of getting caught up in the dream of property ownership. You need to consider whether or not the property is desirable for other potential buyers. You may be looking for the property of your dreams, but you also need to consider the possibility of reselling? Remember when buying rural property you are also buying into the local community. What are the desirable features of that community? Would it attract someone else?
As realtors like to say, it’s about location, location, location. In urban areas this can mean proximity to jobs, school quality, safe neighborhoods, night life, traffic flow, proximity to shopping malls and availability of recreational opportunities. In rural areas many of the same things can apply but you also have to look at quality of the roads, property access, and infrastructure.
It pays to drive around the community and see if the neighbors take pride in their property ownership. If it is a strong and stable rural neighborhood,you have a much better chance of property appreciation instead of devaluation.
You also need to consider the possibility of life changing events. What if something unexpected were to happen that completely changed your health, your mobility, or severely restricted your ability to function on the homestead?
For all of these reasons, and even more, make sure the property has a good possibility of resale.
31. CONSIDER LOCAL ORDINANCES WHEN BUYING RURAL PROPERTY
You may need to search a township website or contact a local board member to familiarize yourself with local laws and rules. Local townships control such things as dog licenses, shooting restrictions, burning permits, garbage disposal, and numerous other things. Many rural townships are very lax about such things. But, if you do not want any unpleasant surprises later, check into these types of details.
32. TIMBER, MINERAL AND WATER RIGHTS
Make certain that these rights are conveyed with the sale.
When buying rural property, you may not think this means much but it is extremely important. Do not take the chance that a valuable mineral or some other exploitable resource is discovered on your property years later only to find out that you have no rights whatsoever over the recovery of that resource, i.e., mining operations.
In most cases, the land owner has timber rights under certain conditions. For example, you may only be able to remove enough timber to provided housing, fences, etc, until the property is paid for. I have seen instances where someone purchased land on a loan, sold all the valuable timber and then defaulted on the loan. Also, find out if there is a timber contract on the land and if so, when it expires. Know your rights under that contract and make sure the company abides by those rights.
33. STEPS TO PURCHASING THE PROPERTY
When buying rural property, every situation is different and the process can vary between states and territories. But, here are the basic steps involved:
Assuming you have decided on a geographic location and the type of property you are looking for, the first step is to get you finances in order. Contact a local lender and develop a relationship with them. I strongly recommend obtaining conditional pre-approval, which is also called pre-qualification. This will help narrow down the price range you can pursue. It will also save you a lot of time, effort, and even money before you begin to look at properties.
When buying rural property, the search for the right place can be exhausting and time consuming. You can save yourself a lot of time by developing a relationship with a local realtor to assist in your property search. Use the internet and local newspapers for searching as well.
Unless you are experienced and knowledgeable about purchasing real estate, I would be very cautious of purchasing property that is for sale by owner. Hire a buyer’s agent (realtor) to work in your corner and help protect your best interest.You could also just hire an attorney but using a local realtor is probably a better plan.
Once you find a property that interests you, search local comparable properties to help determine a fair price to offer the present owner.
34. REVIEW THE CONTRACT
Every seller must have a sales contract prepared and available for inspection prior to offering a property for sale. This contract usually includes a zoning certificate, a copy of the title, and a copy of documents outlining any other registered interests in the property. Review this contact and make sure it is acceptable.
35. MAKE AN OFFER IN WRITING
This offer should include how much you are willing to pay, any conditions such as repairs, and a time frame for closing and moving in. When you make an offer, you may or may not be required to put up earnest money.
Begin negotiations to reach an agreed upon price for the property. During the negotiation process, the seller can receive offers and negotiate with other interested parties. It is a good idea to ask if other offers have been made. Once you both have agreed on a price, you will have to sign a contract and put up an earnest money deposit if you have not done so already.
Although the timing my vary, it is important to arrange to have your own building and pest inspections performed.
Take the contract to your local rural lender and start the loan process. If you have already pre-qualified, this part will go much faster. Your loan application will include financial statements, recent tax returns, current pay stubs, and a list of other assets and liabilities. If you are self-employed, you will most likely have to include income tax returns for 3 to 5 years prior to your loan application.
Cooling-off period. Unless you are purchasing property at auction, most states have a cooling-off period after contracts are exchanged. It is important to ask your realtor if this condition applies to your contract before you sign it. During this time, you can cancel the contract but you may loose your deposit. Some states allow you to cancel the contract for any reason whatsoever and your earnest money is still protected.
Once the loan is approved, the lender will arrange for an appraisal and will notify you of any title issues.
A last minute inspection is also in order to make sure the property is still in the original condition in which you first viewed it. When I was in the process of selling a property, I had the buyer and their agent show up at the property unexpectedly the afternoon prior to closing to do a final walk through.
Prior to closing, you will receive a closing statement notifying you of the amount of money you need to present at the time of closing. Settlement usually takes 4 to 6 weeks.
I know this is a lot of information and a lot of things to consider. However, you must remember due diligence is always in order.
Most likely, there are considerations I have over looked. Bear in mind that each situation is unique. You are ultimately responsible for yourself and protecting your rights. Do not take anyone’s word at face value. Take the time to verify facts, figures, contracts, etc. By going to a little extra trouble, you can save yourself a lot of time, trouble, money, and regret.
I hope this article has been very helpful. Happy hunting for that perfect property.
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