Today in this video we're going to talk about how to buy land and build a house. Check it out. Hi, I'm Rhonda Burgess and I'm a real estate broker and mortgage underwriter here in the Nashville, Tennessee area and my firm is Southern Living Realty Partners. I've had several requests for this video about how to buy land let me say this I understand a lot of you all you buyers are frustrated pissed off just ready to give up because this seller's market is brutal so it gets to the point where you get tired of getting beat out I get it you know like I told y'all before every house getting 10 15 20 offers all that good stuff Even when you go to the builder, the builder is sold out.
They haven't opened up their new phase of lots or they've sold out every lot that they have. And so you're frustrated. I get that. But let me just say this. Buying land to me, in my opinion, is one of the worst things you can do as a first time buyer.
Now, if you've done this before, then you know what all is involved. So cool. But my first timers. Let me tell you something, don't get your hopes up on some land because let me just go over some things with you about buying land.
First of all, there's several different types of land that you can buy. I know it just seems like it's all dirt, whatever, but there's different types of land. A lot of people call us realtors because you're fed up, you want to buy some land.
And so you're looking in. Zillow you're looking in realtor.com you're looking in your local in multiple listing service whatever you're looking online let me just put it to you like that you're looking online and so nine times out of ten what you're looking at when you see land listed like that that's raw land it's raw land just dirt okay so the first thing you need to to know is that banks whether it's a bank a savings and loan your local community bank do not like to lend on raw land because it's so speculative okay because if you let's say you you want to buy this land okay cool and you got your little plans to build your house but something happens and you never build this house or just anything can happen okay so then the bank is stuck with a piece of raw land They don't want that. I'm going to tell you here locally in the middle Tennessee area, I don't know any bank that lends more than 30% on raw land.
So let me break that down for you numbers. If the land is $100,000, then they won't lend nothing but $30,000 at the most. If they'll do it then, you're going to have to bring $70,000 to the table.
So really what you're going to have to do, if you want to buy land, you need to have cash money to buy said land. Okay. This is all it is to it. Now, y'all looking at this raw land. I'm buying me a couple of acres.
I'm building me a house. Or I'm going to put me a manufacturing home on it. Okay. So when you're looking at raw land, where's the water?
Okay. Where's the electricity at? And what I mean by that is how far is the water. that's provided by your local utility, how far is it to get it to your land?
Okay. So is it five miles down the road? Is it 10 miles down the road?
Is there water even close? If they don't have water, so are we doing a well? Okay.
Is it a shared well? Where is the water coming from? So then you're going to have to figure out how.
how much it's going to cost to get the water from where it is up the road around the, you know, because you, you out here in the country, you out here in the country. Okay. So how far is it to get water to your property?
And that's just to get it to the street, you know, the front of your house. Okay. Let's say you bought a five acre lot. You want this five acre lot.
Okay. We're talking about getting water to the street, but you're going to set your house an acre back. So not only you got to pay to run that water to the street, then you got to get that water. Pipe back up to your building site okay let's talk about electricity where's electricity at how many electric poles are you going to have to buy to get the electricity to your property now i'm gonna tell you this is this number is probably real outdated right here but i'm gonna tell you the last time i had somebody even look at this it was 3500 per electric pole so if the electricity stopped a mile back down the road how many poles is that you you paying for the post see you got to pay the electric company for all these poles and to run it out here you got to pay for the the labor and everything okay so we didn't already pay an arm and a leg for to get the water now you're talking about an arm a leg and a booty cheek to get the electric out there okay all right But you want to build. You want to build.
You know, it's wonderful. Now, again, I'm going to talk specifically, specifically about Middle Tennessee right now, okay? We sit on a big old bed of limestone here. This is why you don't see a lot of, okay, especially when you look at Nashville, to the north of Nashville, you will have more basements up there because you know what? They're sitting on a ridge.
They sit on a ridge like this. You know what I'm saying? So you can just kind of like dig into the ridge and do a basement.
But down here to the south of Nashville, it's all flat. We got, it's almost like swampland down here when it rains. Okay.
So how many feet of rock? How many feet of limestone you're going to have to dig out? How many pounds?
How many tons of rock? is on that land okay how much you're going to dig out that's something you need to know okay um you know we had some we had a couple that was coming in out of town from out of town and they wanted to look at some houses but they were also like oh yeah but we found this land online like happyland.com or something you know what this land was for sale and we just know we're buying this land but we'll just look at a house just in case okay cool i'm okay you know Mike was like, well, we just give you the directions, you know, you can just GPS yourself on out there, you know, because we don't do land like that. OK, so when they got out there to that land, this was I mean, I ain't lying. The slope was like this.
The slope was like this. What you gonna build on that? How you gonna dig out all that rock? How you gonna level it out?
You know, you know, you know, when you need that excavator, you need that bobcat and all that stuff. you need that ditch which that stuff is not cheap okay so again where are you getting all this money from to do this land okay now once you get your your utilities worked out and you get your building site worked out then let me back up before even before that you need to get a survey done even you're buying a property from somebody and let's say they don't have a survey they don't have a recent survey okay so you're gonna need to pay somebody go out there and do a survey of that land to you know show you where the property lines are where you know where everything should sit where you should build all that good stuff and right now on a survey i know right here in middle of the sea you're looking at six months or more before you can even get the survey out there and surveys are not cheap they're not cheap so again you paying probably a couple thousand dollars to get a survey make sure you're straight Alright, now, so we've got electricity, we've got water. Now you need to know, does it perk? You need to do a perk test to see how big of a septic system you can do. And if it doesn't perk, like let's say you want to put a three-bedroom house on there, but because of the soil absorption rate, look that up, this is what perking is, okay?
the soil absorption rate absorption rate says you can only put a one bedroom on there what we're gonna do what we're gonna do because see you gotta you gotta your sewer and and your waste management is just as important as that water electricity so what we're gonna do okay these are all costs that you need to figure out before you even get started okay so that's what happens when you want to buy raw land okay so let's go the opposite route let's say now that that doesn't blow your head off because you you talking about spending because land is not cheap land is not cheap and let me just say this if you go on these websites and you see this land and then either how much i can get i can get an acre to i can two acres for like twenty thousand dollars yeah go on with that run with it run it go out there and see it i bet you money there ain't no water there ain't no electricity none of this has ever been there it doesn't perk it's a hot mess or straight up that hill like those other people but hey do what you feel because then see this is the problem i have I understand y'all get frustrated, but then we're not, when you say, well, I'm just gonna buy me some land. I'll be like, and we'd be like, okay, all right. Well, you know, give us a holler if that doesn't work out.
And I'm not, I don't know why you feel insulted by that. It's not that, you know what? No, I'm not finna drive around and look at dirt with you.
We're not finna do that. Because let me tell you something. If I already know your finances is shaking at best, or even let's say you got a good approval. Matt done said, oh girl, they ready to go.
That's for a house. That's for an existing house. That is not for land. Again, you need cash money to buy this land. You need cash money to get this land ready to build.
This is not something that you wake up one day and say, oh, my God, I'm going to buy some land and think it's going to be, you know, unicorns and rainbows. It doesn't happen that way. You need to look at the zoning of that land that you're looking at.
Also, um. If it's an unrestricted lot, like that's what I've been talking about in this first part, this unrestricted, then a lot of times it doesn't have the services that you need, the utilities and everything. Or it may be zoned agricultural. And that means that people out there, your neighbors could have all kinds of farm animals.
you know i know you know everybody's pushing to grow your own food and all this stuff okay that see that's not me that's not me i mean you know i already you know i already have amazon delivering every day and the grocery delivered every day and all this and all that so if you're not comfortable with possibly living next to a pig farm or some or maybe they raising llamas or whatever i don't know i don't know but if you're not comfortable with that You might not want to do this because you need to know how that land is zoned and people may, and if it's unrestricted or it's agricultural, people can do whatever they want to all around you. Okay. So just know that you need to be comfortable with that.
All right. So let's say we're going to do, you say, well, I was looking and I saw this subdivision and they have some lots and I'm going to buy this lot. in this subdivision. Okay.
What you need to know about land, land is just like houses right now. First, the developer will find this raw land and they will develop it. Develop it meaning they'll clear it off.
You know, you might have a million trees on that lot. They need to be cleared off. Like I said before, you may have rocks.
going down so many feet. You need that rock dug out and everything. And then they run, they make sure they get the utilities to the property and everything.
Okay. That's what a real estate developer does. Okay. Then what the developer does is he turns around and sells to a builder.
Okay. And a lot of times your builder may be one of these national builders, a big builder, big builder. Okay.
And so what happens then is He'll sell his the developer will sell his developed land to the builder. OK, and he may go ahead and cut up the lots. So that means that the developer has had to go to the city council meeting and get approval for this new subdivision or this new section of the subdivision or whatever.
And he's had to cut those lots into sizes that fit in that subdivision and everything. Right. And so he's he spent a million.
to get this land ready. Okay? So then he cuts it up.
He gets it approved. Subdivision, all this stuff. That's a lot of work. Let me just say this. That's a lot of work.
Just because you see subdivisions popping up every day. Believe me, they didn't start on that bad boy last week. This has been normally two years at least. Okay? So the developer then gets it all cut up and everything.
He sells it to the builder. And he may have three or four builders in that same... neighborhood just depending on how big it is how many lots he's got okay and let me just say this nine times out of ten if you find a residential lot is zone residential it's a residential lot that is left over in a subdivision maybe they finish that subdivision to three years ago and you looking online and you say oh they still got a lot say i'm gonna go over here and i'm by this lot i'm by this lot when you get there it's the run of the lot it's like this runt of all the lots it's like this or it's oddly shaped or something is jacked up with it okay so don't y'all get excited when you see this stuff on the online and you thinking oh okay so like other people haven't had this same thought this is what you know I don't even know how to say it, but y'all call and like you woke up today and decided to buy land and you think nobody else has thought of this. This is how it goes, okay? So let's say the builder has some lots left, okay, that they haven't sold off yet.
They don't even have a spec home. They don't have a spec home getting ready to be built on there, okay? So you're going to go buy this lot.
What you need to understand. is again you back in the same thing you got to deal with that builder the the even the bank even though it's a it's a it's a it's a residential like now you may can be able to get a construction to perm loan okay at your local at a local bank and i say do a local bank i have never done a land deal with a big bank with a big national bank it's always been a local bank where the people you know these are local people they know the area they know the land there and they're familiar with the builder or they're familiar with your contractor okay let me say this gone almost completely gone are the days when you can be your own contractor and build your own house because the banks is remember what i told y'all about lending money the lending game is all about risk assessment okay so If the bank is going to lend you and your contractor, lend you money, and you're going to have a contractor build your house, you're going to have a builder build your house, they want to see that that builder has a track record of successfully completing homes and doesn't run over a whole bunch of days and has the subs lined up and everything. That's a big risk for a lender because still, what they're really lending on is on your credit.
And... the reputation and credibility of your builder because they don't want to lend they're not going to want to lend money to some fly-by-night contractor general contractor who's never done this before you can't get your cousin elroy okay just because he got his license he has a general contractor like you can't do that they don't want that okay so if you find a builder who has some lots left just know that is still the same thing you're dealing with right now right now it's about 200 225 dollars a square foot to build and that's on a just a moderate home okay if you want these high-end finishes and everything like that it's going to be even more expensive okay so again if you if it's 225 dollars a square foot and you want a 2,000 square foot house you're already at 450. It's the same. Do y'all see how that's no difference than what you're looking at when you go to the model home with the builder? It's no different.
So don't think that just because you decide you're going to buy land that it is easier. It is not. It is 10 times harder. And if you do find that said lot, you normally have to go with one of the builders who is in that subdivision because they own the lot.
and you're still going to have to go by the restrictions and covenants of that neighborhood. Meaning, if the covenants of the neighborhood say that it has to be 75% brick and it has to be brick on three sides, only the back side can have hardy board or some other like the cement siding on the back. It's got to be sodded.
you can't have just straw and grass you gotta have sod on in the front and on the sides or whatever just know that your expenses are still going to run up it's just like it's no different than when you go to the model home or the builder and you know when you go to model home you're going in the tricked out house it's tricked out it's got every option that that builder has okay just know that you are that's not what you're building If you're going to do it yourself and your contract and everything, it is more expensive. Land costs even more than houses right now. And the whole developer, the builder, there's so many costs in there.
And that's even before you even break ground. So just know that buying land and building a house is more than likely more expensive. And it is 10 times the headache than if you just went and bought an existing home or you went to the builder and bought two and got on the list for new construction.
Again, my name is Rhonda Burgess and I'm a real estate broker and mortgage underwriter here in the Nashville, Tennessee area. If you need help with not buying land, but you need help with buying or selling a home in the middle Tennessee area, please feel free to give me a call. My number is 615. 554-0832.
Thank you. And as always, have a blessed day.