About a third of the people who contact us at The Martinelli Realty Team want raw land to build their dream home on.
Frankly, our experience is that most people have only “dreamed” of building until they contact us, and are unaware of the challenges involved.
Very few of them have asked the tough questions about the process of finding and developing a piece of vacant land in North Idaho.
Before you ever look at raw land listings, it is important to answer these six critical questions up front:
Question 1) “What is the availability of buildable parcels?”
As a general rule, if a parcel of land is on the MLS, it is there because it has challenges (most of which are detailed below).
Those who enter the market to find a buildable parcel are soon confronted with the fact that North Idaho does not have much easy land to build on.
Two-thirds of all the landmass in North Idaho is public land. Of the remaining one-third that is private, approximately 40% of that is resource land…privately owned by timber and mining companies. Fact is, only 15% of the total landmass of North Idaho is zoned for residential use, most of which is zoned 5 acres or more!
The past 30 years have seen incredible demand for people wanting to buy homes in North Idaho. In that time, private parties and developers have bought up most of the buildable parcels, leaving the remnants to be picked through…that is what is currently on the MLS.
Question 2) “Why do I want raw land?”
There are generally four categories of people who buy vacant land:
1) Those who don’t want to, or can’t, pay the prices of pre-existing homes: North Idaho real estate prices are not as affordable as they once were. Additionally, there is a certain romance stoked by “Self-sufficient Youtubers” who make building on the cheap and living off the land look like a romantic experience. As a result, one strategy buyers look to enter the market is to buy raw land and build or use alternative building approaches, hoping to save costs. Those considering buying from this approach will find this article very informative.
2) Those who build to get what they want: What these buyers want is just not on the market. Perhaps it is a timber framed home or a multi-generational property, where several family members have their own homes on the same property. Whatever the reason, they are not sensitive to price (or are at least realistic about it) and are determined to build what they want, even though they will pay more for the end result.
3) Those that want raw land now, so it is available for them at a future time: This group is not ready to build due to being years away from retirement, etc. They want to get into the North Idaho market ASAP…someway, somehow, but don’t have the funds or logistical ability to buy a pre-existing home. The most reachable goal, based on their budget and timing, is to buy vacant land now and worry about the logistics…later. Truth is, it’s this approach that accounts for the largest percentage of properties that go back on the market…later. Eventually, this buyer will need to confront the cost and logistics of building on the land!
4) Those who buy raw land as an investment: Unless you are a builder/developer, land is a poor investment. Vacant land is a yearly net drain due to property taxes and HOA payments (if applicable) if not generating revenue.
Question 3) “What does raw land cost?”
Realistically in North Idaho, you can expect to spend 200K+ on a piece of raw land that has water and power available. The closer you are to Coeur d’Alene or Sandpoint the more the price will be. Keep in mind, most parcels are 5 acres or more due to land use classifications (see below)
Many are enticed with raw land that is priced under 100K. Understand, lots under 100K are so for a reason. These properties are still in need of power and water, and will typically have access and lot slope issues which will cost tens of thousands of dollars in excavation and/or engineered foundations.
Keep in mind 70% of raw land listed on the MLS has no water. Wells cost a min of 30K to drill, with a waiting list of one year or more. If the lot is too steep for a well rig, excavation will need to be done prior.
Question 4) “How am I going to pay for the land?”
There are only three ways to pay for vacant land:
CASH: This is usually the only way to pay for raw land.
Owner financing: IF (and few do) owners are willing to carry a loan for you to purchase the land, typical owner financing is a large down (usually 25-50%) at a higher than normal interest rate, with a balloon payoff within 3 or 5 years. Terms are negotiable, but this is the typical scenario.
Lenders: Few lenders finance raw land unless there is a construction loan attached to it. Those that do, will want a large cash down payment and strict terms.
Question 5) “How am I going to pay for THE HOUSE I eventually put on the property?”
Building yourself: Building yourself will require cash! If you get a construction loan, banks WILL NOT let you do the work yourself unless you are a licensed general contractor! The bank will require a bid up front from one or more general contractors and then the bank will only pay (draws) after work gets done in stages by licensed and bonded sub-contractors and approved by a building inspector.
That “Mountain Guy on YOUTUBE” who is milling the trees from his property and building a log cabin or tiny home…no lender!
Or, that “Builder guy on YOUTUBE” who is building a traditional build himself to save the cost of labor…no lender!
Banks have systems in place to ensure licensed contractors build the home, so don’t think you can beat the system by doing the work yourself… unless you do it with CASH!
Using a General Contractor: If you are going to use a general contractor, talk to several about your plan…before you look at properties. They have insight into the market and can tell you what it costs to build in your area. General contractors and sub-contractors have more than their share of work here in North Idaho and are charging a premium for their services.
At the time of this article (late 2020) the MINIMUM cost of building was 250 dollars per square foot. Those who want builders to build for less, will struggle to find contractors even more than normal. Simple math says a 2,000 square foot home at 250 per square foot is 500K without the cost of the land or site development. With the recent increase of lumber prices by 60% since 2019, some builders are even including "lumber riders" in their contracts that allows them to increase the agreed contract price to build the home if lumber costs go up.
You do not build in North Idaho to save costs…you do so to get what you want.
Alternative builds…Manufactured, “Barn-dominiums” and “Tiny” homes: these are more affordable, but they are limited in where you can put them, either because of HOA/CCRs, city/county codes, and/or limitations due to slopped lots or poor access. For manufactured homes…can you get half a house up the road where the property is?
We recommend you talk to manufactured home contractors before searching for land. Lending is also a challenge with alternative builds, so be sure to talk to a lender about your plan if you will be seeking funding as a strategy.
Question 6) “What are some of the major challenges of buying vacant land I should know about?”
*County Land use codes
All parcels are subject to their classifications, and most parcels, not in the cities, where residential homes are allowed are classified, “Agricultural” or “Rural.”
With very few exceptions, “Agricultural” or “Rural” classified lots are limited to 5 acres or more…this means parcels cannot be subdivided below five acres. Each parcel is limited to one primary residence and one accessory dwelling unit (subject to approval).
The square footage of the accessory dwelling unit shall not exceed 1,000 square feet of habitable space or fifty percent (50%) of the habitable space of the primary structure, whichever is greater. This means a 20 acre parcel gets one primary residence and one accessory dwelling unit (subject to approval).
If a family wants to add another home to the property, they must break off at least five acres to create another parcel, which is now subject to its own land use codes.
*Access, access, access!
How are the roads and do you want to be on them in the winter? Roads surrounded by trees get icy and do not melt as fast. As a general rule, blue street signs mean privately plowed and maintain by you and neighbors. Green street signs mean publicly plowed and maintained.
Did you know that lenders may not give you a loan if your property/home is on a private road without a road maintenance agreement? ACCESS will be your most common challenge to rural properties. Don’t rationalize this one away…it matters!
* Amenities:
How far are you from the things you will need like work, schools, health care, church, food, hardware, donuts (this one is critical), etc.
* Hidden Neighborhood faults:
Ah, what those tricky internet photos and glorified descriptions don’t tell you! Pay attention to who and what is around your potential property. Unkempt properties, unfinished homes, railroads, domestic animal noise or smells, etc.? Get out of the car and just listen and pay attention to how you feel about the neighborhood.
* Lot slope/challenges:
Many of the “affordable” properties available on the MLS are steep and challenging to develop. Is there a level spot to build on and room for a yard, shop, septic drain field, etc. Grading, engineered foundations, and poor septic drainage add significant costs most don’t even consider!
*Internet:
Most rural properties do not have cable internet. If you are in a deep canyon without line-of-sight to a cell tower…say hello satellite internet! With satellite internet you can’t have trees blocking the south facing skyline.
* Utilities:
How are neighbors drawing power to their homes…aerial or underground? Where are the utility boxes and/or poles, and how close are they to your potential property. Costs add up quick when drawing power from far away, especially up or down slopped properties.
Remember, it is heavy equipment that sets poles and/or digs trenches for power and they charge a premium for steep and difficult work conditions. For every football field (300 feet) you pull power, it averages a cost of around 10K.
We are very intentional in explaining the challenges of finding and developing vacant land because we have personally experienced these challenges ourselves, and second hand, through dozens of our clients who have developed vacant land. Buying the land is only part of the many challenges that can be anticipated by asking six questions before buying raw land.
Written by Kory Martinelli - Team Owner/Agent of The Martinelli Realty Team of Professional Realty Service Idaho