Author Topic: Potential Land purchase. Need Perspective, please!  (Read 2703 times)

mensa

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Potential Land purchase. Need Perspective, please!
« on: February 09, 2014, 05:19:51 AM »
A bit of background:

We bought our current house from a couple (she a real estate agent, he a contractor) who had had fixed to flip it. The lot size when they bought was about a 1/4 acre. They severed the back half of the lot and had always planned to build their retirement home on it. (Or that was the story, anyway). The lot is unserviced (we're in a small city) and it was apparently quite a fight for them to get the severance. We've been here 5 years now and have enjoyed not having a back neighbor - we call the empty lot "the meadow" and use it for badminton games and general frolicking.

I received a call yesterday from the lot owners. They have decided not to build on it, and have offered the lot to us. I'm having trouble deciding to buy it.

Pros:

- our neighborhood is older and made up of 1/4 acre lots, except for ours. Buying would put this property back on par with the neighborhood. We would, however, maintain the severance, as it would a) keep the taxes lower; b) give us some price leverage when we decided to sell
- if we decided to sell the house, we would have the option of keeping the lot as a future "investment"; i.e. we could sell it at another time in the future. Or we could develop it and sell the package
-due to the nature of our location (walkable {just barely} to downtown, and in an upscale area) it appears, on the face of it, that there would be nothing but upside to purchasing the lot
- owning the lot would block any potential future builds while we live here. The set-backs are such that any home being built on the lot would be quite close to our current (almost non-existent) backyard. We would definitely lose our privacy if/when a home is built there.

Cons:

-extra ongoing expenses. I am (hopefully) RE next month and had not planned for an extra 800-1000 in property taxes. It could be done for a time, but I have my doubts as to indefinite sustainability.
- water and sewer lines do not run past the lot. To get services to it would cost (at this time) 65k, plus a 2-year 75k bond. While I don't think that the price they're wanting plus the 65k to service would make the lot terrifically overpriced, it would be a close call. Our neighborhood has seen a great deal of redevelopment since we've been here. People have been paying around 300k to buy older homes and either tear them down and rebuild, or change/add on massively.
- with Canadian real estate appearing to be about to take a giant dive, I'm nervous to buy more. This is especially true given that the price of the lot may well be topped out right now, and potentially unrecoverable...at least for many years.
- I have a worry that owning another chunk of land might serve to tether us further to our current city. We have great pipe dreams about living an expat lifestyle for a few years, while my mother's health (she's 71) is still reasonable.

I'm having trouble rationalizing the purchase, but I'm also having trouble rationalizing passing on it. I don't want to miss out on an opportunity, but I have a fear that purchasing would be speculating, not investing.

Also, and not to be too "Shirley MacLaine" about it, the timing seems so serendipitous (I'm potentially getting a chunk of change to RE by selling my business right when being offered the lot) that it's kind of spooky and seems like a "fated" thing. Would it be wrong to go against fate?

Anyway, if anyone can help me to put some perspective on this, I'd greatly appreciate it.

Blindsquirrel

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Re: Potential Land purchase. Need Perspective, please!
« Reply #1 on: February 09, 2014, 07:08:36 AM »
  I would skip it, if the lot was really marketable, they can sell it to someone else, you can build a fence cheap. The costs are too high for sewer etc and the extra property taxes will eat cash every year. Canadian RE will take a dive as nothing goes up forever. When it really dives buy the lot for back taxes if you really want it. With such high negatives on the cash side, I do not see it being built on anytime soon. Less so if RE takes a dive.

Rural

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Re: Potential Land purchase. Need Perspective, please!
« Reply #2 on: February 09, 2014, 07:13:17 AM »
So the lot is unserviced. Does it have direct road access? If not, is there an easement through your property? If the answer to both those questions is no, then you don't have to worry about anyone else building there; it's useless to anyone but you and won't sell.

mensa

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Re: Potential Land purchase. Need Perspective, please!
« Reply #3 on: February 09, 2014, 07:51:51 AM »
It does have direct road access. It's on a short cul-de-sac with only two other homes fronting the street (our home is on a corner lot, fronting the more "main" street). Thus, it has reasonable potential for a purchaser, if they're willing to bring the services from the "main" street to the lot...which is about 110 feet (just past our current 100' depth). Apparently, and I am waiting 'til Monday to check this with the City, the site plan contract stipulates that 20k (iirc) is to be re-imbursed should the lot opposite to this lot in question be severed and serviced in the future. This is obviously a big "if", but does knock down the development cost somewhat.

I forgot to mention, and this may also be key: We attempted to sell our home 3 years ago. Every buyer going through it passed, as our backyard (as it stands currently) was felt to be too small. To be honest, I thought people were being idiots, as there are 2 schools literally 1 house past the lot in question, with giant playing fields. The size suits us, but we don't have kids. Maybe it's this experience that's making this decision harder.

Blindsquirrel: You make good points. I'm worried about losing the potential upside, though...either adding to the value of our current home by removing the severance upon a sale, or using the option to develop and sell the lot with a future house down the road. There are currently 4 vacant lots for sale in our city, none boasting this preferred location, none as large. (Mind you, none with the development costs attached, either!)

I hate decisions like this! Arggghhh!

Breaker

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Re: Potential Land purchase. Need Perspective, please!
« Reply #4 on: February 09, 2014, 09:44:23 AM »
My inclination would be to buy the lot.  I know that I would regret it if I was in your situation and someone else had control of what happened on the property behind me.  From what you say, people looking for a house in your area are expecting and wanting a large lot so in the end it should add value to your present home.  In the meantime you could help defray the cost by putting in a nice garden, (veg. & flower).  Even left as it is now, it adds to the enjoyment of your home.  Do a lot of bargaining on the price and search for the cheapest loan you can find. 

Good luck, I too have a hard time making this type of decision.
Jan

mensa

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Re: Potential Land purchase. Need Perspective, please!
« Reply #5 on: February 10, 2014, 04:11:02 PM »
After speaking to the City today, my question is answered:

The 65K mentioned above for services is only for sewer...and it's a 2008 price. I was told the price increases something like 10% per year.
A further 17k for water, based on the lot frontage, plus a 1300 "development" fee
A further 20k in development charges to the City.
Extra fees for building permit, site plan process fee, etc.

So, with the 70k purchase price, to develop the lot would be approaching 200k...before building. Obviously development is off the table.

The only value in the lot would be to increase my lot size, and I sure as hell am NOT paying 70 large for a backyard!

Thanks for the input for those who responded. Always helpful to get different perspectives.

furrychickens

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Re: Potential Land purchase. Need Perspective, please!
« Reply #6 on: February 10, 2014, 04:53:21 PM »
Make a lowball offer on the lot, depending on what you think the extra yard size is "worth" to you. It's not worth $70K but is it worth X? X, to me, would be low five figures, maybe $20K tops.

The cost to develop it is INSANE. If someone is profoundly stupid enough to do it, so be it, but chances are no one will. You have your yard "free" even if you can't sell it with the house.