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What Is Commercial Land? How Do You Buy It?

Published: 06-16-22 Category: Investing

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To put it simply, commercial land for sale is any parcel of land that has potential for profitable use in a business or industrial capacity.

It does not matter if the land has no current use and can’t support immediate development due to its topography, soil quality, lack of utilities, or other reasons.

If it could support such development, it’s commercially viable.

As an investor, commercial land for sale can provide you with a steady stream of passive income in the long term.

Let’s dive into everything you need to know about commercial land for sale, including how to buy commercial land and how to find commercial lots for sale near you, so that your next move is an informed one.

Types of Commercial Land

There are two kinds of commercial land for sale: raw and developed.

Raw commercial land is the undeveloped space that can be used by businesses to construct buildings and other facilities they need to operate on commercial lots for sale near you.

Developed commercial lands have already been prepared with essential utilities like water and electricity so businesses can move right in with minimal setup time and costs.

What Is Commercial Land Used For?

Commercial land for sale is used for many different purposes. It can be used to build:

Office buildings;
Restaurants;
Retail stores;
Parking lots;
Industrial buildings.

Commercial real estate development is an excellent investment for commercial land purchases.

Commercial property, such as office buildings and shopping malls, will always have a place in society because people need places to work and to shop.

How Do You Buy Commercial Land?

Interested in knowing how to buy commercial land? Learning how to buy commercial land is a fairly straightforward process, even for first-time buyers.

First, you’ll need to identify a site that you can develop into office space or retail space by searching for commercial lots for sale near you.

You’ll also need to identify the zoning requirements that apply to your potential property.

Here are some general steps on how to buy commercial land.

#1 – Get Your Finances in Order

Learning how to buy commercial land starts with getting access to enough capital for a down payment and for the expenses associated with buying real estate.

You’ll also may need to take out a loan to cover the rest of the costs associated with buying your property.

For a small piece of property, you may be able to get a loan from your local bank. Large pieces of property may be more difficult to obtain financing for.

Comparing Land Loan Options

There are a variety of different land loan options for commercial land for sale that might be available to purchase commercial land. These include:

A Land Loan from Your Local Bank or Credit Union

A land loan is one of the ways how to buy commercial land. A land loan is different from a mortgage.

While both can offer low rates of interest, a land loan is non-recourse meaning that the lender cannot pursue any assets beyond what was used as collateral in the loan.

A land loan is also short-term and its rate of interest may change.

The USDA Loan

The USDA loan is a type of USDA Rural Development loan that allows you to finance land purchases.

They have flexible terms and have the lowest interest rates for how to buy commercial land.

While most borrowers do go for the lower rate offered by this loan, it is applied only to any commercial land for sale that is listed in a rural area.

The SBA 504 Loan

This type of loan comes from the Small Business Administration and falls under its 504 loan program.

The 504 loan also comes with a low down payment requirement, as well as flexible terms that allow you to make payments on a monthly basis.

It can be both unsecured and secured, depending on what suits your needs best for commercial land for sale.

A Home Equity Loan

If you already have a home, then you can use your home equity to purchase commercial land for sale.

The advantage of this approach is that if you use your own money, there is no problem with approval to get the funding for commercial land for sale.

#2 – Take Every Possible Expense Into Consideration

Any expenses that have to do with commercial land for sale should be considered. These include the down payment and closing costs.

In some cases, there might be hidden costs and fees depending on how you plan to use the land. If you’re planning to build a building, then you will want to plan for the cost of site preparation and grading.

There are land management costs that are related to the upkeep and maintenance of the commercial land for sale, as well as the cost of collecting property taxes.

You’ll also want to factor in what will be happening on your parcel. You might also need to pay for permits and inspections.

#3 – Finding the Land You Want to Buy

There are many ways to find commercial land for sale that is right for you.

Local land brokers generally specialize in selling or leasing commercial strips or office buildings.

They can often point you in a direction that suits your needs best.

Some ways to find potential commercial land to buy:

Brokers;
Free commercial real estate listings;
Online real estate websites.

You may also stumble upon everyday people in your local area who may own plots of land they’re wishing to sell. Keep an eye out for those "For Sale" signs.

#4 – Doing Due Diligence

Before you make a commitment to commercial land for sale, be sure that you do your homework. Research the plot of land you want to buy.

Find out what its utilities are like, its road access, its zoning, and property taxes.

Make sure the commercial land for sale has its necessary permits and passes appropriate environmental tests.

#5 – Making the Right Offer

When you have chosen the land that is right for you, then it is time to make your offer.

Before doing so, there are several important things to consider about the commercial land for sale including the value of the property and your financial projections based on what you plan to use the land for.

You can work with CRE professionals, such as an attorney, to create the best offer and find commercial lots for sale near you.