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Guide for Buying Land for Sale in California in 2023

Published: 07-26-23 Category: Buying

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As one of the largest and most geographically diverse states, California has over 104 million acres of land comprising of rural, urban, and suburban plots. The state is one of the nation's leading agricultural providers, with a yearly agricultural output of over $22.5 billion.

Here, we'll cover the basic process of buying land for sale in California as well as important details about property ownership in the state that you should know.

Let's get started.

How Do I Buy a Piece of Land in California?

The first step to buying land for sale in California is identifying your desired location. Like most states, California counties zone property into commercial and residential districts. If you plan to commercially develop the land, then you need to buy land zoned specifically for that purpose.

California is a very large state, and land prices can vary dramatically depending on where you buy. For instance, below is a list showing average land prices in a handful of California cities:

Los Angeles: $23.26 per square foot;
Sacramento: $3.77 per square foot;
Oakland: $11.06 per square foot;
Fresno: $3.76 per squre foot; and
Bakersfield: $0.93 per squre foot.

If you're a first-time land investor, you should probably look at cheaper land away from the state's major metropolitan areas.

You can find land for sale in California through multiple listing services or other online sources. You can also search for land for sale from the Bureau of Land Management (BLM): The BLM periodically auctions off federal land to private buyers.

#1 – Lot Loans

Guide for Buying Land for Sale in California in 2023

If you're buying raw land in California, you'll most likely need a lot loan. Lot loans, or land loans, come in both residential and commercial varieties. Due to higher risk involved in financing land purchases, land loans in California typically have higher credit and down payment requirements than a typical mortgage loan.

Raw land. Raw land loans are for wilderness plots that have no improvements or infrastructure, such as roads or utilities.
Unimproved land. Unimproved land loans are for land that has minimal road access and some utilities improvements.
Improved land. Improved land loans are for developed land that has road access and functional utilities, like electricity and gas.

Raw land loans usually have the highest down payment requirements due to the risks involved with developing land. Many lenders will have minimum debt-to-income ratio requirements as well.

#2 – Land Access and Easements

California has several plots of rural land that have no road access and are thus ‘landlocked.' What's more, if the only road to access the land goes through another person's property, you may not have the right to use it. The only way you could access such a plot of land would be via helicopter — highly unfeasible for most people.

The presence of safe and legal road access should guide your decision for buying land for sale in California. If there is no road, you could look into getting an easement from neighboring property owners about building a road for access. Easements for road access are one of the most common types of property easements granted in California.

#3 – California ADU Development Laws

If you want to buy land to build a residence, it's a good idea to brush up on the rules covering the construction of accessory dwelling units (ADUs). ADUs are a convenient way to boost property values and can also be a source of rental income.

California recently relaxed some of its past restrictions on ADU construction, making it easier to get the required land permits. California also has an ADU grant program that can reimburse land owners up to $40,000 for ADU construction.

#4 – Water Usage Limitations in California

California is a drought state, so the government has introduced several laws that limit water consumption on private property. It's crucial to understand such water restrictions when buying land for sale in California, especially if you intend to develop that land for agricultural purposes.

Local ordinances in California regulate water consumption levels and usage during different stages of drought. These rules can affect building property or running a business on land purchased in California, so it's not something you should overlook.

How Much Is an Acre of Land Worth in California?

According to a 2022 USDA report, the average cost of farmland per acre in California is $12,000. The price of farmland in California rose by 10% between 2021 and 2022. Keep in mind that this figure is for farmland and that land costs in more developed areas can be drastically higher.

For example, the cost of an acre of land in a high-demand area of San Francisco could be several millions of dollars.

Based on USDA data, the average cost per acre of land in California is about 240% higher than the national average for farmland (~$3,800). Overall, California is one of the most expensive states to buy land.

Is Buying Land in California a Good Investment?

Yes, buying land in California can be a great investment for several reasons. The state is one of the top agricultural producers in the nation, and population growth in the near future will only elevate the importance of agricultural investment to feed growing cities.

Moreover, California is ripe for commercial real estate development, which can be a good opportunity for investors looking to develop multifamily housing. California has an expensive rental market, so buying land for sale in California for housing development purposes can be extremely lucrative for landowners.

However, there are a couple of things investors should look out for: California's cost of living is high and natural disasters, such as earthquakes, landslides, and wildfires, are relatively common compared to other parts of the country.

Property taxes in the state are relatively modest, but other taxes in the state are high. These risks, like others, need to be taken into account before a purchasing decision is made.

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