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What you need to know about buying vacant land

19 Jul 2016

The idea of buying a piece of land and building one’s dream home is a fantasy for many people, but what’s involved in buying vacant land? 

This vacant stand offers 1 103 square metres of land, panoramic sea views and sandy beaches. It is on the market for R340 000 - click here to view.

Charlotte Vermaak, Chas Everitt Nelson Mandela Bay’s principa, says the four big banks here in South Africa, Absa, Standard Bank, FNB and Netbank, will only consider financing residential vacant land if it is 120sqm or larger, and within a proclaimed suburb.

And when they approve finance, Vermaak says the maximum loan will be for 60% of the value, so a 40% deposit is required, and the loan term is only 60 months.

So with this in mind, as an investor, you need to be financially sound. You need to ask yourself if you have the cash flow for the land purchase and the further development thereof. 

Vermaak says the process of buying vacant land takes careful cash flow planning. She says depending on your intended plans for the development of the vacant land, banks typically offer finance systemically as a particular building project progresses.

Consider the costs of maintenance

When reviewing the costs associated with the buying and development of vacant land, you need to include land survey costs, maintaining the land to an acceptable standard and obtaining a building permit.

Vermaak says if your building plans do not comply with zoning restrictions or you want to apply to have the land rezoned from, say a residential 1 (single dwelling) to residential 2 (turning a home into a guest house), there are further costs and valuable time involved in getting approval from local authorities.

And, she says in property development, time costs money, and it needs to be factored into your budget.

Location’s as vital for land as it is for a built property

Before investigating any vacant land for sale,Vermaak says it’s important to clearly outline your objectives for the vacant land you’re buying. Is the land close to transport links and major routes?

What’s on offer?

Blue Horizon Bay, on the outskirts of Port Elizabeth, is a nature conservation area, offering amazing panoramic sea views, beautiful sandy beaches and scenery. The ideal spot to spend your retirement or just to escape for family holidays. For R340 000 you can buy a 1 103sqm stand to create your own dream property.

If you’re a budding property developer, for R1.268 million you can buy a 3 432sqm stand in Windsor Park, Despatch

Despatch is a great area to invest in and develop property as prices are more affordable for many compared to Port Elizabeth. It’s also close to one of the region’s largest employers, Volkswagen.

Lovemore Park in Port Elizabeth has grown to be upmarket, and has priced many out of the area, but Vermaak says there are still a handful of stands available in this in-demand area.

"On sale close to amenities is a 609sqm, northwest-facing stand overlooking a lake. It is on the market for R450 000," she says.
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