There’s two main ways to buy land: cash and terms. I’m going to go more in depth on both of these methods today, their advantages and disadvantages, and what the purchasing process is like for each approach.
Buying Cash: More Cost, Fewer Restrictions
So you’ve got a healthy four or five figures stashed away gathering dust in a savings account slowly being eaten away by inflation? Time to put that hard earned money to much better use. You’re a cash buyer and ready to take action. Land sellers are very happy to see you for some strange reason!
Buying land cash means you pay for the entire cost of the land up front. Naturally, this has a number of advantages: it’s easy and straightforward, and you get ownership of the land right away. The only restrictions you’ll have with your land are whatever the local zoning rules are. And of course, don’t forget to pay your property taxes.
When you buy land cash, the process is simple (once you’ve done your due diligence of course):
- Make your payment on the land to the seller.
- Sign a purchase and sale agreement that the seller provides you.
- The seller then signs and gets notarized a warranty deed that transfers ownership to you, and files that deed with the county clerk’s office.
- Enjoy your land! You’re free to use and improve it as you see fit, in accordance with local zoning laws.
The downside to buying cash is its obviously more money out of pocket today than if you bought your land on terms.
Buying On Terms: Less Cost, More Restrictions
So you know you want to buy land – for family vacations, a retirement home, a long-term investment, bragging rights, or all of the above – but you don’t have a thousands of dollars just laying around? You’re like 75% of all land buyers in the good ‘ol U S of A – you’re a proud terms buyer. Land sellers love you too because terms allow us to connect hardworking people with the property of their dreams.
Buying land on terms means you pay for your land over time in monthly payments.
The biggest advantage is quite clear: you don’t break the bank in buying your land and you get to enjoy it while you’re paying it off. These are wise monthly payments, because they’re paying for an asset: something that will hold and likely appreciate in value over time. You can always pay off your land early, too.
There are two disadvantages however worth keeping in mind. First, you won’t gain full ownership (that is, title to the property) until you’ve completed making your payments. Second, while you’ll have access to your land for things like camping/RVing, you won’t be able to physically improve the property until you have full ownership. Improvements include things like digging a well or installing power.
Here’s what happens when you buy land on terms:
- Make your downpayment on the land to the seller.
- Sign a purchase and sale agreement, a land contract, and a promissory note.
- Set up your monthly payments with the seller.
- Enjoy your land for camping and recreational purposes!
- Make your payments on time each month according to the terms you agreed to with the seller.
- Once your payments are completed, the seller signs and gets notarized a warranty deed that transfers ownership to you. The seller files this deed with the county clerk.
- Enjoy your land as its official owner! You’re free to use and improve it as you see fit, in accordance with local zoning laws.
So, What Should You Do?
Whether you buy cash or on terms depends on (1) how much money you have available and (2) what your ultimate goals are with the land you’re buying.
If you have the resources and your goal is to build a house or simple hunting cabin right away – improving the land by adding infrastructure like power, water, and septic along the way – then you should buy your land cash.
If your goal is to buy land initially as a vacation spot (a place to bring your Airstream and your significant other perhaps) and in the long term build a retirement home, then you should buy your land on terms. You can enjoy your land in the short term as a vacation spot while you’re paying off the land. Once your payments are completed in 3-6 years, you can then begin to improve it and eventually build a house on it.
Either plan will work!
In Our Experience…
What I’ve seen most buyers do, as you probably expect, is buy on terms. For most of our properties, the down payment is several hundred dollars and monthly payments range from $115-$325 per month.
For most people, $150 per month is obviously easier than plunking down several thousand dollars all at once. And unlike a similar bill like a car payment, those funds are buying a tangible, likely appreciating, asset that you can improve and/or sell later on.
The fact an everyday person can enjoy their own personal vacation spot for a reasonable monthly payment and eventually own their own land in just a few years (if not sooner) is very appealing.
Ok, I’ll get off my soapbox, but this is why the motto here at Ocala Road is “Land investing is for everyone.”