Buying Raw Land When You’re Self-Employed

I’m sitting here at home on a Saturday night instead of hanging out on a sailboat with friends and while I was really looking forward to a little getaway on the water….RAIN. It rained today. It’s still raining. It looks like it might just rain tomorrow and even Monday and I couldn’t be happier about it. The rain part, not the botched sailing plans the first time this year we even made plans to be on a boat.

Figures.

Given the state of BC with burning bans in full effect and over 180 wildfires burning in various parts of the province, I know I’m not alone in this collective celebration for more than a drizzle after a six weeks stretch of dry hot, hot heat. Yes, this means the garden is happier, already looking greener. The chickens aren’t panting, even if they are looking a little wet behind the wings. The goats…well, the goats are pissed because they hate the rain and have no concept of wildfire risk.

For us, this rain is a relief for another reason. When you’re about to embark on clearing part of an acreage, it helps if the weather cooperates in such a way that the idea of chainsaw sparks doesn’t inspire fear…and ultimately a dead stop.

Right, for those of you just catching up. The land we’re purchasing is raw. Forest. We’re buying 10 acres of forest.*

Having never bought a condo or house before, I admit that my insight into the process is limited at best. But with the light at the end of this treacherous tunnel of raw land purchasing so close I can almost feel it…let me just say, it’s not for the faint of heart. Putting aside all the additional things you need to think about (well, septic – do we want septic?, landscaping, driveway, road number, building schedules, building permits, building bylaws, building inspections….) just getting the bank to even look at you seriously can be a challenge.

Especially when you’re self employed.

We knew this would be an uphill battle, which is why our original purchase path was taking us back to Ontario. For a third of the price we could have twice the land. That being said, in most places we were drawn to this came with $10,000 building permits and severe restrictions on anything and everything you could ever want to do. Plus, snowshoes. I had fun snowshoeing as a vacation-y thing. I would not be thrilled if that was my every day reality for tending to animals and keeping my sanity from slipping away with an almost two year old and impending newborn on the way leading into Winter 2015.

Our first meeting with a mortgage specialist was telling enough. She sat down with us, brochures in hand ready to hear which subdivisions and school district we were drawn to – presuming, since we were having the meeting in Campbell River, we would be purchasing in Campbell River.

Well…

As we started to talk about our work and homesteading and what we needed in land, you could see the glimmer in her eye fading away. She nodded appreciatively, but it was clear we were not the textbook first time homeowner candidates you want walking into your office at the bank. I in turn appreciate that they are running a business, not loaning money out of the goodness of their hearts. But in the end, we walked away not exactly feeling confident that we would be able to make this whole dream a reality without a co-signer, one of us taking on a job where it would be possible to produce a letter of employment or redefining our dreams to fit into a cul de sac.

That’s scary. In an economy where more people are finding alternative ways to earn a living outside of the conventional 9-5 standard…this leaves a significant dividing line between those who can enter the housing market and those who need to give up any idea of home – let alone land – ownership.

Add in the layer of farming…and you have a new set of issues and hurdles to face when trying to secure financing. In our second discussion with a mortgage specialist, she listened to us talk as well then guided our answers around homesteading and farming very carefully to ensure we weren’t actually thinking of farming full time. Again, a little research on our part was a good thing. We knew that would not be well received so we left our micro dairy blueprints at home and stuck to the party line of being driven digital consulting professionals (not a lie, just not where we want to be in 10 years).

We’re very fortunate that we have steady clients, consistent accounts and a stream of web projects that keep our books looking stable instead of volatile. Yes, there’s fluctuations at times, but we don’t go through windfall months then see our coffers drain while we want for a new project to come in. Though we try to stay prepared in case that very normal cycle for independent contracting does hit us in the future.

It’s that piece of the puzzle, plus seeking out a credit union instead of a conventional bank that is now making it possible for us to make the purchase. There have been additional layers to prove our financial stability and it’s not been an easy process, but we’re getting there. All this to say, it is possible but it’s not easy.

• You might get turned down a bit. Or a lot.
• You need to make sure you’re being realistic about what you can afford and what they will reasonably approve. Thankfully, if you’re self employed and looking at raw land they will likely be much more conservative about the maximum loan amount than if you were looking at a more conventional house.
• This is regardless of whether you can pull together the 35-50% downpayment that will be required.
• Remember the land is a small chunk of what you’re going to spend making it habitable. Look into what it’s going to cost to put in a well, clear a space for your home, add a septic field.
• Find out what a building permit is going to cost.
• What’s the zoning on the land?
• Have an accountant. I don’t, I wish I did, I swear I will next year.
• Overdeliver on the evidence that you’re not a deadbeat and actually a viable self-employed professional worth investing in.
• Get a mortgage broker. They’ll find you the most competitive rates.
• Build with cash if you can. Try to avoid being on the bank’s schedule by getting a building loan.
• Be optimistic but also be realistic. About costs, about timelines, about everything.

So yes. It rained today. We should have the title on our land before the end of the month. Then break ground and start the migration to our new future farm.

Updated: since there are more things I’m thinking of or running up against during this process, thought I’d keep another list for ‘new’ items to consider.

• If you just recently went solo, you may not qualify. They want to see at least three years of self employed tax returns (we just barely make the cut).
• If you are separated or divorced, they are going to need to see proof that you’re not on the hook for alimony or child support – since this would need to be factored into what you could afford.

*Hah! Tricked you, this isn’t the batshit crazy part. Nice try though, we’re not going to share all the nutty details until after the official closing date makes it really and truly ours.