Calculate budget

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Due diligence
Down payment
Conversion costs
Carrying costs

Due diligence:
You will need to conduct a lot of research regarding the land you want to purchase that is usually not necessary for developed land.

Down payment
Down payments tend to be higher for raw land purchases because things such as houses that banks could use as collateral for the loan do not exist on raw land. Your down payment may range between 20-50% of the total price of the property.

Conversion costs
This includes the costs for anything you will need to do to convert the land for your intended use, such as:

• Site prep
• Home construction
• Utilities : Running utility lines, digging a well or installing a septic system

Carrying costs
This includes things such as the interest on your loan and any property taxes. Unlike residences, raw land is not considered to depreciate for federal tax purposes, so you can’t take a depreciation tax deduction for raw land.

Just how much money does this work out to in dollar terms? Typically, for the down-payment and other costs, you should try to have about 20-25% of the purchase price available in cash as a rule of thumb. In addition, you should have a steady stream of income to cover carrying costs (like loan repayments). This will also help you qualify for any lending you may require.