Should I buy acreage in Kentucky?
Many Kentuckian’s dream of owning land.
Some people are interested in farming and raising livestock. Others dream of the financial gains from a development project. No matter your goal, acreage is a sound investment.
Land is a finite resource. There’s no way to produce more of it and it’s always in demand. It’s a strong asset that holds its value and can be passed down to future generations.
According to Acretrader:
- Kentucky ranks 16th in the country for total farmland returns
- Kentucky farmland sees average returns of 8.05% per year.
- Over the last 20 years, Kentucky’s price per acre has increased an average of 4.5% per year.
Despite strong data points, there is still a lot to know before purchasing land. Weigh the pros and cons carefully before diving into a land purchase.
5 major considerations before buying land in Kentucky
Consider your neighborhood
If you plan to live on the acreage as your primary residence, you should consider the area. Here are some things to consider:
Even if your neighbor is out of eye-shot, they are still neighbors. What are they like?
How far away is the nearest grocery store?
What are the school zones like?
2. Utilities and Access Roads
Depending on the state of your raw land, you may have to build your own roads and driveways to access the property. If you’re seeking a new start on fresh land, you can expect to pay anywhere between $6,000-$34,000 to set up your water, electricity, and sewer. Topography, soil type, and location dictate how expensive this project will be.
3. Different types of mortgages
Homes with acreage typically require different types of mortgages and often require higher down payments.
4. Potential for surprises
With any home, there is potential for surprises after closing day. The more home you have (or the more land you own) the more likely you are to run into an unwelcome surprise.
5. Get comfortable with wildlife.
Kentucky’s temperate deciduous biome is the perfect habitat for wildlife. Living on raw land means you’ll have to deal with the potential for raccoons, snakes, bugs, and other wildlife.
Guide to buying land in Kentucky
Step 1: Hire a real estate agent.
In 2020 only 8% of residential real estate transactions were facilitated without a real estate agent. That number is even lower for land sales. The stakes are high with land sales and the transaction process is different when land is involved. We strongly advise having a professional on your team.
Step 2: Budget
No matter what investment you’re making, budgeting is vital. When planning a land purchase you need to budget for more than just a down payment and monthly mortgage payment. Take into account water access, electricity, sewers, access roads, environmental testing, and high down payment. Use a land loan calculator to help you in this process.
Step 3: Search for your dream property
This is the fun part. Tour different properties and let your daydreams run wild. Identify your purpose for the land. Do you want to find acreage with a home already on it or would you prefer to build your own dream home? Typically, raw land will always be cheaper but also have many more costs associated with it.
Step 4: Research
After you’ve found a property that suits your needs, start doing homework. The county zoning and planning office can inform you of any upcoming development plans for the area. Review the property history to see if any liens are impacting the property. Determine the exact property boundaries and check to see if there are any restrictions in place for how the land can be used.
Step 5: Financing
Not all mortgage lenders will finance land. Your real estate agent should be able to help you find a trustworthy lender for your situation. It’s worth interviewing local banks and credit unions as well as mortgage brokers. There are two different types of land: raw land and improved land. Be aware that raw land often requires a larger down payment (usually 20-50%).
Step 6: Inspection and Surveying
Like with any home purchase, you’ll want to get an inspection before closing day. You’ll need to go through environmental tests and checks. These tests check for soil contamination and flooding potential. They will ensure the land is suitable for building. You will also want a surveyor to identify the exact property boundaries. Your surveyor can identify the exact locations of any easements or encroachments on the property. If anything pops up after the fact, your title insurance will protect you from these issues. But it’s always better to go into your sale fully informed.