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You dream of owning your own land, building a home, and growing your own food, but it takes money to get there. What are the best ways to finance the homestead of your dreams? How can you find land to get started?
Many of us dream of owning some acreage, maybe building our own homes and growing our own food. Maybe you want some chickens or goats. Perhaps you even dream of escaping the rat race.
This dream is well and good; in fact, we dreamed of it for nearly nine years before we actually bought our land and set to building a cordwood home.
Why so long? Truthfully, for much of that, we were broke af. We had big dreams and a small budget.
The truth is, to buy land, build a home, and create a productive homestead it takes money. Real money. And sure, there are really inexpensive ways to reach your dream, but no matter what do you need a plan to manage your money and reach your homesteading goals.
Financing Your Homestead (even if you’re flat broke)
First off, if you would describe yourself as “flat broke”, then you need to do some serious work on getting your finances in order. Healthy financial habits are a critical part of a good homesteading experience. You may need to start here:
How to Rock Your Debt Snowball to Get Debt Free
How We Paid Off $24,000 in One Year As Teachers and Freelancers
Three Money Tips For Couples Who Want to Live a More Self-Sufficient Life
How We Live On Half Our Income To Build Our Homestead
Quick-Start Guide to Starting a Profitable Blog
Figuring Our Your Funds
Before we get to the various ways to fund a homestead, it’s important to take stock of your money situation.
Whether you’re flat broke or flush with cash, you need to figure out what your financial situation will allow you to do. Depending on the cash you have on hand, your income, job stability, or other plans, you could find yourself:
- Saving up the funds for a down payment or full purchase price while living in your current home
- Selling your current home (if you own it) and putting the proceeds towards your new homestead
Put together your own hypothetical budgets and figure this out for your family. You can check out our free Owner-Builder Quick Start Guide for more information about how to get started doing this.
We chose to sell our house and put the money from the sale towards the down payment on our land and the initial building materials. A lot of research and number crunching went into that decision, which is absolutely what anyone looking at doing this kind of project should do.
So what should YOU do? That really depends on your situation.
In the meantime, start looking at your numbers and use them as a guideline as you go through these options for finding and financing your homestead land:
5 Ways to Finance Your Homestead
1. Rent a House
If you aren’t yet in a position to buy a home but you’re tired of renting an apartment, look into renting a house instead. Renting a home gives you time to save up for a proper down payment or cash to buy outright, plus it gives you an opportunity to practice your homesteading skills.
In our first year married we went from a small apartment in town to a little house with a small backyard. We were still in college, so it was close to campus, but the yard allowed us to grow a small garden and have a nice compost bin.
Depending on your area you may be able to find homes for rent with acreage too. Check Craigslist, Facebook Marketplace, local classifieds, and even bulletin boards at local shops for listings.
2. Take a Traditional Mortgage
We actually have a small loan on our 16 acres and for some of the critical components of our home to allow us to finish the build (though we did the vast majority of the build for straight up CASH).
How much DID it cost to build our homestead from scratch anyway? Find out here.
It is important to note that borrowing money doesn’t have to be an all-or-nothing deal. If your goal is to build a home with cash on hand, a mortgage for the land can get you there faster. It can free up funds for building materials and avoid construction loan protocols. You can even add on to an existing land loan to finish construction if funds get tight.
There are some crucial things to know about taking out a mortgage for land though, chiefly:
- The down payment will be MUCH higher than for a home, typically 20-50% of the total purchase price.
- The terms will likely be shorter, perhaps 10, 15, or 20 years (this is good overall, but means your monthly payment will be higher).
- Many traditional lenders won’t lend for raw land, so you may need to look into farm credit options.
There’s a LOT more to know about taking out a traditional mortgage, so head over to read our most shared post here about the six financial tips for buying your homestead land.
If you’re just starting out, check out these things to know about not only financing your homestead build but INSURING it as well.
3. Owner Financing
In owner financing, you and the owner of the property set up a borrowing agreement and you send your monthly payments to the owner instead of a lending institution.
This can be a great option for those with limited funds for a down payment, poor credit, or for those in areas where land loans are hard to come by.
BEWARE THOUGH. If you choose an owner financed plot of land, you need to do your due diligence BEFORE entangling your livelihoods and legalities. I don’t care if the owner financing you is your favorite uncle or the parents of a friend you’ve known since you were five years old.
TALK TO A LAWYER. Find out the best ways in your locality to create a legally binding document and ensure that both parties are adequately protected by the law. The last thing you want is to lose your dream homestead because the owner suddenly decided to pull it out from under you.
4. Cheap Land At Auctions and Estate Sales
Inexpensive land can be found at both private and state auctions and sales.
Most areas will have real estate listings for private estate sales and auctions. It is possible to find these on local multiple listing services (MLS) or by talking to reputable real estate agents in your area. You can start with a simple Google search for “land auctions near [your location]”.
You may also be able to find land through your state government via the Department of Natural Resources, Finance and Administration Cabinet, General Land Office, etc.
For example, the Michigan Department of Natural Resources lists land here.
Texas lists through their General Land Office here.
Some states may only sell their surplus land to eligible non-profits or 501(c)(3) entities, so check your state to make sure before you get your heart set on a property on their listings.
Related: The FIVE things you need to do before you purchase land
5. Free Land
Yes, even in the 21st century it is still possible to get free land. There are often catches including the plot size/location, building requirements, or even requirements that you start a business. Even still, there is free land out there for those willing to relocate and follow certain guidelines, if applicable.
Before you start thinking that this is a good option if you’re flat broke, just remember the hidden costs in everything. It will take money to move to any location, plus determining your living arrangements once you’re there, any applicable taxes or fees along the way, etc.
You can start your search for free land here or here.
Continued Reading on Homestead Finance
The Basics of Financing and Getting Insurance For Your Home Build
6 Financial Tips for Buying Land for Your Homestead
Buying Land: 5 Critical Things to Do Before You Purchase
18 Things to Consider in Homestead Land
6 Reasons You’ll Blow Your Construction Budget
If you want more detailed guidance…
Sign up for our email list to get access to our Members-Only Resource Library. We have loads of free materials to help you get started making your homestead dreams a reality!
To help you make the best financial choices for you and your homestead goals, I highly recommend taking a look at The Owner-Builder Home Planner. If you’re to the point that you’re serious about creating your perfect homestead from the ground up and you don’t want to go bankrupt in the process, do yourself a favor and check it out.