Unimproved Land: What It Is & 6 Legitimate Ways to Finance It

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Unimproved land is a type of real property for which financing can be difficult to get. We’ll explain what unimproved land is and offer some legitimate ways to finance it.

What Does Unimproved Land Mean?

What is unimproved land? The term unimproved land refers to land or property that remains in its natural, undeveloped state. Unimproved land (also commonly called vacant or raw land) has not been altered or improved by human activity in any significant way.

Because raw land is undeveloped, it typically lacks important infrastructure like electricity, water, and sewage systems.

Unimproved land meaning: Any land that remains in its natural, undeveloped state and has not been altered or improved by human activity.

Where To Get Financing

Is it possible to get a loan on unimproved land? Yes, it is, but it’s not as easy as getting a loan on your home. Land lending is a more specialized market that relatively few banks participate in.

Having said that, there are a few different ways you may be able to finance the purchase of vacant land:

  1. Local community bank – Local community banks tend to offer loan products that cater to the needs of the local community and aren’t offered by major national lenders. If you’re interested in financing a land purchase, we recommend checking in local community banks first.
  2. Owner financing – Because land loans are harder to find, many sellers offer owner financing. A big advantage of owner financing is it’s flexibility; the terms can be whatever you and the owner agree to. If you go the owner financing route, we recommend having the note drawn up by a qualified attorney and recorded at the county recorder’s office to make it official.
  3. Cash out refinance – You may consider borrowing against the equity of your home or rental property using a cash out refinance or HELOC.
  4. Personal loan – If you’re not planning to spend a large amount of money on the land, you may be able to finance it with a personal loan.
  5. Auto loan – If you have a lot of equity in your car, you may be able to borrow against to purchase the land. Again, this probably only makes sense if you’re not planning to spend a lot on the land.
  6. Retirement savings – If you have a large balance in your 401(k) or IRA, you may be able to borrow against it to finance your land purchase. Instead of borrowing from and paying interest to a bank, you can be your own own bank. If you plan to borrow from a self-directed IRA, make sure you understand the rules against self-dealing.

Again, most major mortgage lenders don’t lend for unimproved land. We recommend that you don’t waste your time contacting well-known mortgage lenders such as Quicken/Rocket Mortgage, PennyMac, Bank of America, Wells Fargo, etc. If you want to get land financing through a bank, we recommend starting with a local community bank.

Image of unimproved land.

What is Unimproved Land Used For?

Unimproved land is most commonly found in the form of open space or agricultural land. However, there are many common ways that people use vacant land, including the following:

  • Agriculture – Growing orchards, crops, timber, and raising livestock.
  • Recreation – Parks, open spaces, and recreation areas.
  • Wilderness and open space conservation – Preserving natural habitats and wildlife.
  • Camping – Campgrounds and preserves that cater to outdoor enthusiasts.
  • Community gardens – Urban and suburban residents can grow their own vegetables and flowers.
  • Events – Hosting fairs, festivals, or outdoor events.
  • Land banking or investment – Holding the land as an investment for future use.

Vacant land is commonly developed (or improved) in the following ways: 

  • Residential development – Building houses, apartments, mobile home parks, condos, etc.
  • Commercial development – Building stores, offices, or other businesses.
  • Education – Building schools, colleges, or training centers.
  • Industrial development – Building factories, ports, or warehouses.
  • Parking lots – Providing space for cars in urban areas.
  • Solar farms – Installing solar panels to generate renewable energy.
  • Wind farms – Installing wind turbines for clean energy production.
  • Community space – Building gathering areas, plazas, or public squares.

Tips for Buying Land

Buying unimproved land can be an exciting adventure, but it’s important to be well-prepared to make a wise investment. Here are some tips for buying unimproved land:

  1. Set a budget – Start by figuring out how much money you’re willing to spend. Keep in mind that buying land isn’t just about the initial cost. You’ll also need cash for property taxes and any improvements you plan to make.
  2. Location matters – Think about where the land is located. Is it close to schools, stores, and other important places? Is the area safe? Think through what you want to do with the land and whether the location will help you accomplish it.
  3. Research zoning laws – Zoning laws govern what you can and cannot do with the property. Make sure your plans align with these rules.
  4. Utilities and access – Check if the land has access to essential utilities like water, electricity, and sewage systems. Adding utilities can be very costly, so you’ll want to make sure you know what you’re getting into before you buy. You’ll also want to make sure there’s a road or other legal access to the land.
  5. Survey the land – Get a professional land survey done to confirm the property boundaries and understand its topography. This will help you avoid boundary disputes and plan for any improvements you want to make.
  6. Environmental considerations – Find out if there are any past or present environmental issues that can impact your plans for the property. If the property was previously used for something else, make sure you know what that was and if there any lingering environmental hazards that can be expensive to clean up..
  7. Get professional help – You may want to bring in experts like real estate agents, lawyers, land appraisers, and title agents. They can help you through the buying process and ensure you’re making a smart investment.
  8. Visit the land – Visit the land multiple times at different times of day and in different weather conditions. This will give you a better feel for the surroundings and any adverse environmental factors that may impact your use of the land (bad drainage, excessive noise or light from neighboring properties, etc.).
  9. Negotiate patiently – Once you find the right piece of land, negotiate patiently and carefully. Don’t rush into a deal. Be prepared to walk away if the terms aren’t favorable.
  10. Buy title insurance – Owner’s title insurance helps protect you from unexpected problems with the ownership of your new land. Even if you carefully research the land’s history, you could miss old claims, unpaid taxes, or title mistakes that could jeopardize your ownership rights. Owner’s title insurance covers legal costs and financial losses related to these kinds of issues.

Buying unimproved land can be a rewarding investment, but it’s crucial to do your homework and make informed decisions. We hope that these simple tips can help you make the best investment decision you can.

Property Taxes

Undeveloped land is subject to property taxes just like any other piece of residential or commercial real estate.

Property taxes on vacant land tend to be much cheaper than for developed land, but they can still add up to a sizable amount for large parcels. We recommend contacting the county assessor’s office to determine how much property taxes you’ll need to pay for the parcel you plan to purchase.

Frequently Asked Questions

What is the difference between vacant and unimproved land?

From a practical standpoint, there’s not much different between vacant and unimproved land. Technically, unimproved land remains in its original wild state with no human improvements whatsoever. Vacant land has no improvements on the surface, but it may have underground utilities. Most people probably use the terms interchangeably.

What is the difference between raw land and unimproved land?

From a practical standpoint, there’s not much different between vacant and raw (or unimproved) land. Technically, raw land remains in its original wild state with no human improvements whatsoever. Vacant land has no improvements on the surface, but it may have underground utilities. Most people probably use the terms interchangeably.

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About Mike Roberts

Mike Roberts is the founder of MyHECM.com, an author, and a highly experienced veteran of the mortgage industry. When he's not working, he enjoys spending time with his family, skiing, camping, traveling, or reading a good book. Roberts is the author of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage, which is available on Amazon.