How to use due diligence to choose your perfect property.
Decide on a location that is appropriate for you and your needs. Many smart investors buy land to diversify their investment portfolios. Land is a tangible asset that will always have “real” value, it can be used to live on, rent, lease, barter/trade, loan, or sell; it is not just a piece of paper that could be worthless the next day like a stock certificate (do they still make those?). Land is a safe investment that you can hold on to for a rainy day, use for retirement, flipping, and/or passing on to loved ones. Land can also bring in an income stream from using it as a rental property, extra storage, farming, gardening, livestock, trees, overflow parking, getaway, a park, recreation, camping, fishing, RV parking and more; you name it!
You can easily do your own due diligence before buying by doing some simple online research.
Make sure you have the following information ready before you begin:
- County and state where the property is located
- Name of the current owner(s)
- Assessor’s parcel number (APN) or Property identification number (PIN)
- Book and page number for a copy of the deed recording, liens, and maps (if available)
A great source of information on your property is the county assessor’s website where your property is located. Just do a Google search for “Assessor Klamath County, Oregon” -or- “Los Angeles County, California GIS” and you should easily find the county website for your property. Tip: If you cannot find the assessor using Google, then you will probably have to do it the “old-fashioned way,” and do a Google search for the “Official Marion County, Florida Page” or search for any county phone number and see if they can find the Assessor’s contact information.
Once you have the assessors’ phone number call them and see if they have an online website with a Geographical Information System (GIS) as it should have all the information you require. As of this writing, most counties do have some form of GIS or online property search tool, but there are still some counties living in the “Stone Age.” For those you will need to call and ask them questions about your property directly; they are usually very friendly and willing to help.
During your call, you should get the following information:
- Do you have an online GIS system?
- The GIS system if available is a valuable tool if the county your property is in does have a GIS system then by all means try and use it.
- Current owners name and address?
- If you do not already have it, you can get it by using a Title Company or Realtor.
- What is the Assessor’s Parcel Number (APN) or Property Identification Number (PIN) for the property?
- The APN or PIN number is a special number like a Social Security Number for every single property in the United States used to track the property to collect taxes from the current owner of that property.
- What is the full legal description of the property?
- It is better to have it emailed or faxed to you if possible as sometimes they are very long and difficult to read and you do not want to make a mistake here.
- Expert Tip: if you have a good copy of your legal description, you can simply cut (with real scissors), paste (with real glue) it to your exhibit page, and photocopy it so it would be impossible to make a mistake or typo.
- Is there a copy of the deed available?
- Sometimes you can order a certified copy for a few dollars if you send them a self-addressed stamped envelope and a brief letter with your request.
- What is the Assessed Value (A/V) of the property?
- The assessed value, used for taxation purposes, does not reflect the actual value of the property, which may be higher or lower depending on numerous factors. Think about this… Would you sell your home for the assessed value today? What was the value about two or three years ago? Has your A/V gone up or down in the last few years?
- What is the property zoning?
- Zoning is different in each county so be sure to talk to the county planner if you are unsure about any zoning rules.
- Tip: It never hurts to ask… If the person you are talking to does not know then ask for someone more knowledgeable or call a professional for advice.
- What are the building restrictions?
- Can you build what you want on the property?
- Can you do what you want on the property?
- Is the property subdivideable?
- Is it possible to section off the property into smaller parcels to sell or build on? This can be quite profitable if you consult the right people and get professional advice.
- Does the property have an easement?
- Is there access or right-of-way to the property? In some states, law guarantees access to property; while in other states such as Texas, you may need to obtain an easement to your property from a neighboring or adjacent property owner.
- Are there utilities to the property line?
- Is there electric, sewer, water, telephone, garbage, etc.?
- Better yet are their environmental alternatives available that would work to suit your needs such as solar, geothermal, wind, hydropower, generator, septic, or well.
- Where is the property located?
- Many vacant properties do not have assigned addresses and may have a temporary address: VL Main Street, Portland, Oregon 97230. In this example, the VL stands for “Vacant Lot or Land” or depending on the county; they may just list a street name with no other information about the location.
- If possible, obtain the Global Positioning System (GPS) coordinates so you can pinpoint your property precisely.
- Expert Tip: You can search Google > Maps using GPS coordinates by doing a Google search such as: 38.889496, -77.035235 (cut-and-past digitally into Google Maps and see what you find.)
- Are there any maps of the property available?
- Since we are dealing with vacant land, sometimes there is no address to the property and there is no other information on locating the property available. This is where a plat map or parcel map comes in especially handy. Usually the map will give street names or closest intersections to the property so that you can use Google Maps to narrow down where the property is located.
- Expert Tip: If you right click on where your property is and then click “Directions to here,” Google will give you the coordinates to where you right-clicked your mouse. It is a great way to find your GPS coordinates quickly. If Google doesn’t work for this there are many other programs including Google Earth that should help you get the GPS coordinates of the property you are researching.
- Finally! Be sure to ask any other information you might need for your due diligence gathering effort. It never hurts to ask.
Another great source for information, if you can get it, is by using a title company. Do a search for a title company in the area where the property is located and pick a couple. Once you find a few give them a call and place an order for a “Trio” for the property you are researching. A trio includes the tax information on the property, a parcel map or maps, and a title abstract; hence the name trio. The title companies will usually be happy to perform this service for you FREE of charge hoping to get your business sometime in the near future. Note: Sometimes a title company may not be willing to help or does not have the capabilities you are requesting… if this happens, just move down your list until you find one that does.
You can also call several realtors in the property area to get comparable listings in the area or do a Zillow.com search and look at the comps in the area. Zillow is a good tool, but it is not as great as getting a “market analysis” or “appraisal” from a Realtor. A good Realtor should be willing to provide a “market analysis” free of charge, if not then move down your list. Remember: if you have a good experience with a Realtor, keep their contact information in your Rolodex because someday you may want to sell and that is where a Realtor can really help. Be sure to ask the Realtors you call about the rules and regulations that apply to buying land in the area you are interested in since they should know the area very well. You can also ask them about the neighborhood and if you are having them do a “market analysis” for you, you can always ask for some digital snapshots of the property since they will more than likely visit the property anyway. If you plan on building on the property, be sure to contact the County Planner where the property is located and talk to them directly. They are usually happy to help, remember they are public employees and their job it is to help you so they do this a lot.
An important step is to visit the Better Business Bureau website and do a search for the company or person(s) you are doing business with and check their BBB rating. The Better Business Bureau rates companies from an A+ thru F rating just like when you were back in school, so it is very straightforward. You can also look up any complaints that have been filed and file your own complaints as well. If you search for our company “Land Trust Company, LLC” you will see that we have an A+ rating and many of our competitors have much lower ratings, including many F ratings, which is the worst possible rating. Do consider this important free resource when doing your property research.
Once you find your property, you can pay in full, apply for a mortgage, or purchase the property via owner financing if the owner is open to giving you a personal loan against the property. Most mortgages on vacant land require 35% down, good credit, and your interest rate is typically between 10-22% depending on your credit worthiness.
Sign all contracts to the purchased property. Make sure that you discuss any questions you may have with an attorney, Realtor, or seller before signing the final documents. If you are unsure about something, it does not hurt to ask for expert advice even if it costs a few dollars.