What is Raw Land?

Raw land is real estate with no improvements or infrastructure, in need of utility connects, roads, earth grading, covenants and entitlements. It is land that is cleared and ready for physical development that is completely unimproved without an infrastructure. Improving the infrastructure provides a base for further development of built improvements.

Awareness of what covenants and entitlements do is essential to starting a project. Covenants delineate the framework in which future development of built improvements are able take happen. These come in the form of deed restrictions or private zoning codes. Entitlements, usually in the form of permits and sometimes through re-zoning or planned unit developments, are securely legal permissions from regulatory bodies. Once these improvements have been made to the raw land, it is typically subdivided and sold piecemeal at a profit to individuals or building developers.

As an investor, you must look at each piece of land objectively. After you find one or more promising plots, you will have to do research and a lot of it. Avoid getting taken in by the view if you are looking to develop it. You have to look deeper and a smart buyer looks well beyond the obvious. Raw land has to be surveyed to see if it follows the make-or-break test.

First and foremost, a viable water supply is needed as well as sewage disposal. Many urban and suburban dwellers new to the real estate market will tend to overlook that. Buying a piece of land in a remote area that has no visible sources of water is straight up gambling. It is not feasible or true that if you dig deep enough you will eventually hit water. It's just not true.

Buying a piece of land without ascertaining if it has water available is like buying a car without finding out if it comes with an engine. You will, at the very least, do a percolation test, which measures the rate at which water drains through the soil and shows that a septic tank will work on the property. Next, you will want to see documented boundary lines done by a licensed surveyor. If you neglect to have a survey done, you could wind up building on somebody else's land.

Banks are often very wary of lending money for investors who want to invest in raw/undeveloped land because of the complexity of bringing the project to completion, geographical limitations and the increased uncertainty and risk. Private Lenders prove to be more tolerant because they have a better ability to evaluate these factors and can provide funding for Raw Land purchases, refinancing or equity cash-outs. Raw land loans are generally tied to the value of the property and not the borrower's personal credit.

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