A beginner's guide to buying land (© © Richard Nowitz/Getty Images)

© Richard Nowitz/Getty Images

When real-estate prices are down, it may look like a good time to pick up a second property to use someday for vacation or retirement. But then you'd have the hassles of maintenance and perhaps dealing with renters, not to mention the cost.

Perhaps there's a better alternative: buying raw land. You'd have your spot nailed down, and you could always build on it later. Plus, by having less money tied up, you could finance construction by selling your current home later when prices are higher (presumably).

It's not a bad option, but it does require some special considerations. (Bing: Can you buy land for free?)

First, everyone needs a home but not everyone needs raw land, so there are generally fewer potential buyers for empty lots. That means the land you buy today could be difficult to unload in the future if your plans change.

Because lenders know this, they often demand higher down payments and loan rates to finance land purchases, offsetting the risk in case they get stuck with the property after a foreclosure. Instead of getting a mortgage, the buyer may do better by paying cash, or financing the purchase with a second mortgage on his primary residence.

Not all raw land is maintenance-free, however. If it has been cleared for construction or farming, the brush and saplings will have to be cut from time to time, and a dirt access road may need attention, too, especially after the spring thaw. A site in a development may involve homeowners association fees, and of course there are likely to be property taxes.

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Unless you could lease the land to someone else, such as a farmer, raw land won't produce any income to offset costs, while a property with a home on it could be rented out.

As a rule of thumb, owning raw land makes better financial sense in locations where the land is cheap, you can pay cash or carry an inexpensive loan. Where the land is pricey -- as in cities and popular vacation areas -- it's better to have a home on it that can generate income. The cost of the home may be a comparatively small portion of the property's value, but it could produce considerable income in a high-demand area.

Before buying land, ask local building and zoning officials about permits that are required to build, as well as restrictions on building types, setbacks and so forth. A property may come with permits for septic fields or other improvements, so make sure the permits will not expire before you're ready to build. Be especially careful about buying a property that will require a well, which can be very expensive depending on the depth.

In some areas, the seller, or even a previous owner, retains the mineral rights, typically for oil or natural gas. Be sure to find out whether you'd be able to prevent intrusive drilling.

In any rural or undeveloped area, it's important to find out how things might change. A site with a lovely view may not be as appealing if the farm across the road turns into a housing development or strip mall.