Guide to Buying Land for Sale in Texas in 2023
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Texas land has seen double-digit growth in the past two years, making it one of the best states to choose from if you're looking to buy land. Texas' large size, affordable property prices, and rapid commercial development have made it a popular state to buy land in.
Whether you're an investor, developer, business owner, or simply a curious mind on a journey to learn how money works, we'll cover the basics behind buying land for sale in Texas in 2023. We'll go over land use policies, property taxes, mineral rights, down payments, average land costs, and more.
Let's get started.
What Do You Need to Know Before Buying Land for Sale in Texas?
Texas is known for its historically lax real estate development laws, and many regions in the state are currently experiencing rapid commercial and residential real estate development as a result.
Let's start with some of the key features of buying and owning land in Texas that you should be aware of.
#1 – Texas's Land Use Policies
People buy land in Texas for many reasons, including agriculture, hunting, industrial, residential, or mineral extraction. Like most states, development authorities define which land can be used for which purposes.
Zoning laws are regulations set forth by local governments that determine what you can and cannot do with land that you buy. For example, if you buy land that is zoned for residential use, you can't build commercial real estate on it. It is possible to rezone your property, but the process is long and complex.
Fortunately, Texas has some zoning-free areas. For instance, Houston is one of the only large American cities that doesn't have property zoning laws, so its land use is extremely flexible compared to other areas.
#2 – Property Taxes in Texas
The State of Texas doesn't charge income tax, but it does have the sixth-highest effective property tax rate in the nation at 1.66%. Texas doesn't have a state-level property tax, and property taxes are instead set by local assessors on 100% of the appraised value as of January 1st of the current tax year. You can search local property tax rates through the state's property tax directory.
The state also has a general residence homestead exemption that allows landowners to exempt up to 20% of the home's appraised value, with a minimum of $5,000. You must own the land and use it as your primary residence to qualify for this exemption.
#3 – Texas Surface Rights vs. Mineral Rights
Texas is rich in natural resources, like oil, gas, and minerals, so the state enforces a complex system governing resource rights and land usage.
Texas property law distinguishes between surface rights and mineral rights in the following ways:
- Surface rights include the right to inhabit the land and develop the surface, and
- Mineral rights include the right to mine natural resources under the surface.
Generally, mineral rights belong to the party that owns the surface rights, but this is not always the case. For example, a previous owner could sell the surface rights to a plot of land to someone else but retain the mineral rights. The mineral rights owner would then retain the right to extract resources from the land regardless of who owns the surface rights.
Managing conflicts between surface rights and mineral rights in Texas can be legally complex, so it's crucial that buyers understand the difference when buying land for sale in Texas: Buying land you don't own the mineral rights to can impact future plans for development.
How Much Do You Have to Put Down to Buy Land in Texas?
The size of the down payment you pay to buy land for sale in Texas heavily depends on the amount of the loan and the specific loan provider. Land loans are different from a home mortgage and often have stricter approval standards.
Land loans in Texas take one of three main forms:
- Raw land loans are for undeveloped property that lacks road access and other kinds of infrastructure. Raw land is usually the cheapest to buy because it costs the most to develop, but down payments might be higher.
- Unimproved land loans are for land that has minimal road access and infrastructure, such as utilities. Unimproved land occupies a middle tier between raw and improved land, with moderate down payments and interest rates.
- Improved land loans are for land that already has road access and utilities infrastructure. Improved land is the most expensive as development is mostly complete, and improved land loans may lower rates and require smaller down payments.
Standard land loans typically require a 20% down payment, though some lenders may offer loans with down payments as low as 5%.
How Much Does It Cost to Buy 1 Acre of Land in Texas?
According to the data gathered by the Texas Real Estate Research Center, as of the end of Q1 2023, the average price of one acre of land in Texas is approximately $4,500. Land prices in Texas have spiked sharply over the last three years, showing a nearly 54% increase since Q1 2020.
The cost of an acre of land in Texas is about 10% lower than the national average ($5,050) but has grown significantly faster than the average price in the same time period from 2020 to 2023. Overall, Texas is one of the less expensive states to buy land in.
Is Buying Land a Good Investment in Texas?
Yes, absolutely. Buying land for sale in Texas can be an excellent investment thanks to the state's largely affordable prices, abundant natural resources, and high commercial development activity. Texas land prices have seen a massive spike in value in recent years due to increased demand: In 2021, land sales reached an all-time high, with over 840,000 acres sold.
A good chunk of this demand can be explained by the state's rapid population growth. Texas added over 470,000 new residents in 2022 alone and recently surpassed a total population of 30 million. Land sales are expected to continue increasing as we continue into 2023 and beyond.
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