Author Topic: Buy property to eventually build?  (Read 7634 times)

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Buy property to eventually build?
« on: June 18, 2015, 09:53:19 AM »
Hey MMM Crew

tldr: Property available that is perfect, would have to build.  Wondering if it's worth the expense, knowing that we wouldn't build for 3-5 years, but would be paying for this place, plus our current mortgage.

I've got a bit of a opportunity at hand, and I'm looking for people's opinions.
Currently, my wife and I own an acreage that we bought for 82.5k, currently owe 59k on.  Now, we have done a CRAP load of work to this place, and once we had the basement finished, dead trees down, shed fixed up, and some other stuff completed, I had the realtor that sold us the house come out and give me an idea of what she'd list it for.  In other words, I didn't want to pay for an appraisal, and this was a good way to get a baseline on what the property was worth after the improvements.
She said that she'd probably want to list the house at 125k, hope to sell between 115-125k.  That gives me a conservative equity in the house at 50k, 65k if sold for 125k.  Pretty good return in the 3 years that we have lived there, not to mention we did the bulk of the work ourselves, which saved us a boat load of money.

So, with that said, I'll also inform everyone that I owe 48k in student loans.

Now, the fun part - my job is out of 3 different locations, all 16 miles, one way, from where we live.  My wife works about 30 miles one way.  **To note, we live in the middle of no where, not in a city or anything like that. 

Now, a piece of property, which we had looked at before, but didn't buy because of the condition of the house, is going to be for sale eff 9/1/15.  This is in an ideal location, the school district my wife and I want to be in for our daughter (and however many more come after her), and is close to my 2nd "job".  I'd be 3 miles from one office, and about 20 miles from the other two.  My wife would be 15 miles one way now.

Okay, now, would you consider buying this place?  The house would need to come down (controlled burn - free), we have access to backhoes (free), so we can get it down with no cost.  Clean up with no cost besides diesel fuel.  Knowing that we wouldn't be building until 3-5 years down the road, is this something you'd do?  Given, if we buy the property and end up not building, we could sell it again as it is in an ideal location, and get our money back.

I'd imagine that we'd be paying 25k-30k for the place, which does have two usable garages on it, one with a heated portion attached.

My thoughts are buy it.  When the time comes, list our place to sell, and when we get it sold, we should have enough money saved for a down payment in our savings account, and the extra money we make above what we owe on the mortgage would satisfy my student loan debt.  So, we'd get out of two loans, and have a downpayment on where we would stay...for good.  No more moving.  It'd be our forever home.  Guaranteed. 

Thoughts?


frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1671
Re: Buy property to eventually build?
« Reply #1 on: June 18, 2015, 09:59:32 AM »
If you could pay off the student loans with a check now, maybe.  We would need your household income and expenses first.

Otherwise:  You just bought a property with a mortgage on it 3 years ago and have big student loans.  Fagetaboudit!  Also:  A lot of realtors "blow smoke".  I wouldn't take the "off the cuff" appraisal too seriously...
« Last Edit: June 18, 2015, 10:02:14 AM by frugaliknowit »

skunkfunk

  • Handlebar Stache
  • *****
  • Posts: 1057
  • Age: 33
  • Location: Oklahoma City
Re: Buy property to eventually build?
« Reply #2 on: June 18, 2015, 10:29:41 AM »
Are you sure you'll have the same jobs? That's a long time to be sitting tight.

Additionally, that is still too much of a commute for the other jobs. See here - http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

Pass. I'm not saying you shouldn't sell your current place and move into another or a rental or something, but I don't see the point of buying 5 years ahead of time.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #3 on: June 18, 2015, 10:41:21 AM »
If you could pay off the student loans with a check now, maybe.  We would need your household income and expenses first.

Otherwise:  You just bought a property with a mortgage on it 3 years ago and have big student loans.  Fagetaboudit!  Also:  A lot of realtors "blow smoke".  I wouldn't take the "off the cuff" appraisal too seriously...

Valid points.  This realtor has sold this house the last 3 times it's been available, and knows the area well.  We bought it as a 2 bed, 1 bath, now it's a 4 bed, 2 bath.  Went from 1100 sq of finished space to 2200 sq ft.


Household income, after my wife passes her boards (see, I'm staying positive, not "if she passes" but that she'll pass), we'll be bringing in 4500 a month, plus my monthly commissions.
Mortgage is $650
Student Loans: $350
Daycare $500
Energy Bill: $125 average
Cell phone: $100 (very limited carriers have coverage in this area, I know that is pretty anti-MMM)
Hulu/Netflix - $15 a month for both
Auto Insurance - $90
Life Ins - $83
Dog - $50
Fuel - $300 (I get to expense my fuel through work, so that varies depending on where I go)
Groceries - $300 - this is lowering as we are moving away from baby food and formula with our daughter, thank God - that stuff is spendy
Throw in $100 misc (I'm just starting to actually track this stuff closely, I've been good at it in the past, but was frustrated with our finances while my wife was in school, pregnant, and only having my income).

So, $4500 income - full benefits through work - funding my 401k and her state available pension (works at a county hospital)
Bills - $2,600 - $2,800
That leaves a surplus of $1,700-$1,900


TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #4 on: June 18, 2015, 10:44:06 AM »
Are you sure you'll have the same jobs? That's a long time to be sitting tight.

Additionally, that is still too much of a commute for the other jobs. See here - http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

Pass. I'm not saying you shouldn't sell your current place and move into another or a rental or something, but I don't see the point of buying 5 years ahead of time.

Yes, positive we'll be in the same jobs, easily until retirement, if we so choose.
There is no changing the commute, we aren't in a traditional area - if we keep our jobs, which we plan to, the only thing we can do is move closer to the half way point.  At some point, my job will move to just one location, instead of 3 - and his new acreage would leave me a 3 miles commute every day - easily bikeable.

The only reason we are even considering it, is because it's in a perfect location, on blacktop, and these come available once every, oh, 10-15 years in our neck of the woods.  We farm on the side, and we have farms within a mile or two of this place as well - and our main shop is about 6 mlies from this place, instead of the 25 miles that I am at currently.  So, when I'm working my job til 5 PM, then farming til Midnight, it'd alleviate the 25 mile trip home.

Probably pull down an additional 5k a year with the farming, which will also only increase over time (depending on commodity prices).

**Also, this isn't interstate commuting.  It's county roads and 2 line highway commuting, 15 miles = 15 minutes.  No traffic, no bumper to bumper (I've lived that before when I lived in our capital city, my 15 miles commute took 40 minutes.  Miserable.)
« Last Edit: June 18, 2015, 10:46:05 AM by TheInsuranceMan »

skunkfunk

  • Handlebar Stache
  • *****
  • Posts: 1057
  • Age: 33
  • Location: Oklahoma City
Re: Buy property to eventually build?
« Reply #5 on: June 18, 2015, 10:46:09 AM »
Are you sure you'll have the same jobs? That's a long time to be sitting tight.

Additionally, that is still too much of a commute for the other jobs. See here - http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

Pass. I'm not saying you shouldn't sell your current place and move into another or a rental or something, but I don't see the point of buying 5 years ahead of time.

Yes, positive we'll be in the same jobs, easily until retirement, if we so choose.
There is no changing the commute, we aren't in a traditional area - if we keep our jobs, which we plan to, the only thing we can do is move closer to the half way point.  At some point, my job will move to just one location, instead of 3 - and his new acreage would leave me a 3 miles commute every day - easily bikeable.

The only reason we are even considering it, is because it's in a perfect location, on blacktop, and these come available once every, oh, 10-15 years in our neck of the woods.  We farm on the side, and we have farms within a mile or two of this place as well - and our main shop is about 6 mlies from this place, instead of the 25 miles that I am at currently.  So, when I'm working my job til 5 PM, then farming til Midnight, it'd alleviate the 25 mile trip home.

Probably pull down an additional 5k a year with the farming, which will also only increase over time (depending on commodity prices).

What a strange situation. Most of us here have a single desk job, so my advice is likely not strictly relevant. I do have a bunch of extended family that farms on the side and they tend to buy expensive pickups and drive the piss out of them.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #6 on: June 18, 2015, 10:47:23 AM »
Are you sure you'll have the same jobs? That's a long time to be sitting tight.

Additionally, that is still too much of a commute for the other jobs. See here - http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

Pass. I'm not saying you shouldn't sell your current place and move into another or a rental or something, but I don't see the point of buying 5 years ahead of time.

Yes, positive we'll be in the same jobs, easily until retirement, if we so choose.
There is no changing the commute, we aren't in a traditional area - if we keep our jobs, which we plan to, the only thing we can do is move closer to the half way point.  At some point, my job will move to just one location, instead of 3 - and his new acreage would leave me a 3 miles commute every day - easily bikeable.

The only reason we are even considering it, is because it's in a perfect location, on blacktop, and these come available once every, oh, 10-15 years in our neck of the woods.  We farm on the side, and we have farms within a mile or two of this place as well - and our main shop is about 6 mlies from this place, instead of the 25 miles that I am at currently.  So, when I'm working my job til 5 PM, then farming til Midnight, it'd alleviate the 25 mile trip home.

Probably pull down an additional 5k a year with the farming, which will also only increase over time (depending on commodity prices).

What a strange situation. Most of us here have a single desk job, so my advice is likely not strictly relevant. I do have a bunch of extended family that farms on the side and they tend to buy expensive pickups and drive the piss out of them.

Ahh, expensive pickups :)  I only see about....50 of those a day in my area.
I work out of 3 different locations for my desk job - as an insurance agent, we have 3 different agency offices, and I'm the guy that travels between them. 

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3265
  • Location: State: Denial
Re: Buy property to eventually build?
« Reply #7 on: June 18, 2015, 03:46:25 PM »
It sounds like a good opportunity, but I have a couple questions:
1) Why wait 3-5 years to build?  Is it so you can save up enough for a down payment on building the new home?
2) How much will it cost to build a home on the new lot?  Will you be reusing the foundation, or digging/pouring a new one?
3) Where would the money for the lot come from?  Small loans like that are harder to come by.

A couple other thoughts:
1)  If you're working from dinner time to midnight on farming, and only pocketing $5k/year, that's not a job, that's a very slightly profitable hobby.
2)  No, you shouldn't do anything until your wife has a full-time job, especially since your total income will only be $4500/mo. (what's your estimated total commission for a year?)
3)  If you bought the property for $25k, you'd have $142k of debt on a $54k/year income.  That's not a horrible debt-to-income ratio, but it's not good, especially considering the fact that your student loans will have a higher interest rate.
4)  Your needs/desires/values may change over the next 3-5 years, and there's a very good chance that what you want now is not what you'll want 3-5 years from now.
5)  Again, what's holding you back from just selling your current place, buying the new lot, and renting for a few months while your new home is built?  This to me sounds like the best course of action if you're actually interested in that land.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #8 on: June 19, 2015, 10:21:03 AM »
It sounds like a good opportunity, but I have a couple questions:
1) Why wait 3-5 years to build?  Is it so you can save up enough for a down payment on building the new home?
2) How much will it cost to build a home on the new lot?  Will you be reusing the foundation, or digging/pouring a new one?
3) Where would the money for the lot come from?  Small loans like that are harder to come by.

A couple other thoughts:
1)  If you're working from dinner time to midnight on farming, and only pocketing $5k/year, that's not a job, that's a very slightly profitable hobby.
2)  No, you shouldn't do anything until your wife has a full-time job, especially since your total income will only be $4500/mo. (what's your estimated total commission for a year?)
3)  If you bought the property for $25k, you'd have $142k of debt on a $54k/year income.  That's not a horrible debt-to-income ratio, but it's not good, especially considering the fact that your student loans will have a higher interest rate.
4)  Your needs/desires/values may change over the next 3-5 years, and there's a very good chance that what you want now is not what you'll want 3-5 years from now.
5)  Again, what's holding you back from just selling your current place, buying the new lot, and renting for a few months while your new home is built?  This to me sounds like the best course of action if you're actually interested in that land.

Zolo, thanks for the response, I'll address your questions.
1) Why wait?  Well, I'm waiting for my wife to take her boards, and pass, which will result in a 75% pay raise.  I don't want to rush into this, and make finances tight, where I could sit on the property until we have paid down our mortgage and SL's a bit more, and saved up for a sizeable DP.
2)  I've been in contact with a builder and will be touring some houses in the coming weeks, and furthering our discussions into pricing, floor plans, sq ft, etc.
3) Money for the lot will come from the bank that I work at (we are a "bank agency").  They understand that market, and have sold several acreages such as this in the 100 years we've been around.  As long as I can show that we are planning on building, or that if we don't build, we'd be able to sell the lot back off for little to no loss after we clean it up (we don't plan on ever selling it, if we buy it, but that option has to be there incase something happens to come up).

On your thoughts..
1)  This farming that we do, I'm paid $17 an hour, work maybe 3-4 weeks in the spring, 3-4 weeks in the fall.  As my FIL ages, one of his sons and I, will as of now, be taking over the operation, and keeping our full time jobs.  We run about 2k acres right now.
2)  She has a full time job, just is getting paid as a "tech" instead of an "assistant", which she will get the day she passes her boards.  Estimated commission is tough, to be honest.  I just use my salary for my numbers when budgeting, and we will be throwing all commission money and farming money towards either my SL's, or savings for a DP on the new place.
3) 54k net income, yes.  Gross would be in that 70-75k range, excluding commissions and other income - I'll pull down 38k, before taxes, without commissions, and my wife will be making about 37k.  Pretty weak incomes, but are in a LCOL area for sure.  Our currently acreage was bought for 82.5k, 20% downpayment, and a 15 year loan.  Our payments are $650 a month.  A lot less than you'd see in a city or HCOL area.
4)  I get your point on this, but I'm 99% positive that our desires won't change.  The agency I work for has been around for 98 years, all three others in our office are 50+ years old.  I'm very secure in my job.  My wife got the job that she moved home in hopes to get (moved home as she got into PTA school) - she had interned there throughout college, and it's a county hospital, so, job security is perfect, and she is very well liked.  Not to mention that my inlaws are 3rd or 4th generation farmers, and even if we dropped the rented ground and just farmed the owned and sharecropped stuff, we'd be over 1k acres. 
5)  Holding back is waiting for her to get her wage increase, meeting and figuring out floorplans and pricing on what it'd take to put a new house up, and with the local towns having under 600 people - rentals aren't exactly the easiest thing to find!  I say 3-5 years as a baseline - I'd love to be there in a year, to be honest.  But, I don't want to push things too tight, and if waiting a year will allow us to save 5-10k to put towards the house, as well as find a buyer that might be willing to purchase our current place, knowing that we'd only move when our new place is finished, is still a possibility.  The realtor that we'd use has sold our acreage that we are currently in the last 3 times it's been sold.  She knows the market, and will be of great help to us.


Just spit balling numbers here..
Let's shoot low, say we sell the house for 115k.
Mortgage of 49k, student loans of 45k.  94k in debt - pay it all off with the profits in the house sale, leaves us with 21k to put towards the new house - knowing that we'd already have purchased the vacant lot.  That is PLENTY available funds, you're right.
Let's assume that we take a small home equity loan for our downpayment on the 30k acreage - so 6k, we'd have 100k in debt before we sell the house, leaving 15k available.  That is still enough to make stuff work, because we won't have any other debt that we are making payments on (no car loan, student loans would be paid off, no credit card debt, etc.).  Not to mention the bank I work for would probably loan me w/ 0% down, knowing that we have no debt, and higher than median income for our area.  Obviously, that isn't the route that we want to go, but it's a possibility.

 Maybe I'll check w/ the realtor on the average time it takes for stuff to sell in our area - which is closer to a couple big towns than the place we are looking to buy, assuming there might be more demand in our current area for houses to sell.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #9 on: June 19, 2015, 10:23:57 AM »
And we still have a few small things to finish in our house to tidy it up - trim in the basement, new trim upstairs where we put down new flooring when we bought the place.  Actually, that's about it - pretty minor.  It could use a few new insulated doors in our mudroom..


zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3265
  • Location: State: Denial
Re: Buy property to eventually build?
« Reply #10 on: June 19, 2015, 12:43:38 PM »
Thanks for clearing things up--it looks like I misunderstood a few things, especially the numbers.  You're in much better shape than I thought, to be honest. The farming thing is only for part of the year, and you're making reasonable pay at it, and the $54k is your net, not your gross

That changes your financial picture significantly, but only alters my recommendation a little bit.  I'd say go ahead and buy the land as soon as you can once your wife passes and ups her income, and start building as soon as possible after. It's up to you whether to sell your current home and rent for a few months, or stay in your current home until the new home is ready.

In either case, I suggest you minimize the time you're paying for two properties (either rent + land and new house, or old house + new land and house).

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #11 on: June 19, 2015, 01:02:24 PM »
Thanks for clearing things up--it looks like I misunderstood a few things, especially the numbers.  You're in much better shape than I thought, to be honest. The farming thing is only for part of the year, and you're making reasonable pay at it, and the $54k is your net, not your gross

That changes your financial picture significantly, but only alters my recommendation a little bit.  I'd say go ahead and buy the land as soon as you can once your wife passes and ups her income, and start building as soon as possible after. It's up to you whether to sell your current home and rent for a few months, or stay in your current home until the new home is ready.

In either case, I suggest you minimize the time you're paying for two properties (either rent + land and new house, or old house + new land and house).

Yeah, sorry about that original post, I misstated a few things, and didn't go indepth enough on others.  And yes, 54k is net, gross would be before taxes/401k/benefits, etc.

I'll hear back about the acreage next week, and it's just trying to get my wife away from studying for a day or two to see some houses.  I can sit down myself with the company to get an idea on base price stuff - we are looking at modular homes - 7-10 weeks to build, 2x6 exterior walls, which means more insulation for my cold, cold winters.  Quite a few in my area in the last few years, all very highly recommended.

I've thought about the renting route, but it worries me a bit.  If I know I can sell it, I'd prefer to off load it and not have to worry about a rental.  Rentals get a little scary around here with a lot of hired laborers.  I really just don't want the headache associated with it,and I'm not sure it'd be enough to cover my mortgage anyways.

We will for sure be trying to minimize the time we are carrying loans on both places.  It's just finding the time to sit down and chat with the home people, with the people selling the acreage, and with one of my loan officers (which is super easy..just a short walk down the hallway).  I just don't know how soon they are looking to sell - they mention Sept 1, but that time frame might be able to move if they know they have it sold...

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: Buy property to eventually build?
« Reply #12 on: June 19, 2015, 01:05:53 PM »
One thought to add- CAN you wait 3-5 years to build?

A lot of the land being sold around me currently states you must start building within 1 year of purchasing the land, and you must complete the building within 1 year of beginning.  The fines are hefty if you do not.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #13 on: June 19, 2015, 01:24:57 PM »
One thought to add- CAN you wait 3-5 years to build?

A lot of the land being sold around me currently states you must start building within 1 year of purchasing the land, and you must complete the building within 1 year of beginning.  The fines are hefty if you do not.

This property is out of town, no zoning/building requirements.  Good point though, something that is needs to be considered in different area's of the country, that's for sure.

Fuzz

  • Bristles
  • ***
  • Posts: 338
Re: Buy property to eventually build?
« Reply #14 on: June 19, 2015, 01:38:34 PM »
Seems like an OK plan. I guess I'd question the assumption that nothing similar is going to be available in 3-5 years. The land is only 20-25K? That seems pretty cheap and I live in flyover country. It seems like a low risk relative to your incomes/assets.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #15 on: June 19, 2015, 01:48:55 PM »
Seems like an OK plan. I guess I'd question the assumption that nothing similar is going to be available in 3-5 years. The land is only 20-25K? That seems pretty cheap and I live in flyover country. It seems like a low risk relative to your incomes/assets.

The reason it is so cheap is there are two old buildings that need to be taken down and buried, and the house isn't in good enough shape to live in.  So, essentially, I'm buying 5 acres with two useable buildings, too many trees to take down to make it into tillable acres.  With that, the people who owned it (that are now passed away) told their kids that they wanted it to go to a family, and wanted a family to live there again, and wanted to make sure it wasn't super expensive.  So, that helps.

I think I was told they are going to sell it for 45k, if I want the 2 tillable acres as well as the acreage, or 30k for just the acreage.  I'm hoping I can get that to 25k, which I think is feasible. 

Dicey

  • Senior Mustachian
  • ********
  • Posts: 10893
  • Age: 61
  • Location: NorCal
Re: Buy property to eventually build?
« Reply #16 on: June 19, 2015, 02:02:05 PM »
In light of your specific circumstances as stated, I vote yes. I'm FIRE, pro real estate and fiscally moderate, FWIW. The fact that you will be able to clear the property and thus increase value for little more than sweat equity is the deciding factor.

I don't care about paying the student loans first, but I will use this platform to point out that had you opted for a 30 year mortgage (and made payments on a 15 year schedule on your own), this would have been an even easier decision. Just an example of how a mortgage can help create wealth. Radical concept around here, I know. Please let us know what you decide.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #17 on: June 19, 2015, 02:12:44 PM »
In light of your specific circumstances as stated, I vote yes. I'm FIRE, pro real estate and fiscally moderate, FWIW. The fact that you will be able to clear the property and thus increase value for little more than sweat equity is the deciding factor.

I don't care about paying the student loans first, but I will use this platform to point out that had you opted for a 30 year mortgage (and made payments on a 15 year schedule on your own), this would have been an even easier decision. Just an example of how a mortgage can help create wealth. Radical concept around here, I know. Please let us know what you decide.

Thanks for the input Diane.  We did a heck of a lot of work on our current house when we bought it - textured all the walls and ceiling, new laminate floors in the kitchen, dining, and bathroom, carpet in the two bedrooms.  New shower surround due to mold in the bathroom, new sink as well - new sink in the kitchen - added two cabinets and more useable counterspace as well in the kitchen.  We've blown in insulation in the attic.  Re-did the entry way/mud room - finished the basement completely, two bed, 1 full bath down there, nice sized living room w/ wet bar, separate laundry down a hallway, and a utility room.  Sheetrocked, mudded, painted, etc. - Only thing hired out was some boiler heat work and some duct work for the AC runs in the basement.

Took down, oh, 30 dead pine trees, seeded the lawn where those were...steeled a shed that was on the property, added an overhead door so I could park in it, sliding door on the backside which I use for my lawn mower and tractor (to move snow), and a walk in door.  Shelving and a work bench built in there as well.

We don't owe any money on the improvements that we did, and they are going to EASILY pay for themselves.  The realtor said she has sold 3 acreages in the past week, said she'd except it to sell within 2 months or so. 

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6445
  • Location: BC
Re: Buy property to eventually build?
« Reply #18 on: June 19, 2015, 08:03:42 PM »
Only buy it as an investment, one that you would put that much money into, without the desire to live on it.  I personally would not leverage to buy a vacant property.   Vacant is a $ in the hole. For taxes and resale costs and such. If you move to follow an awesome job?

If I was tired of index funds, and it had a crappy rental on it?  Maybe.

Rural

  • Magnum Stache
  • ******
  • Posts: 4842
Re: Buy property to eventually build?
« Reply #19 on: June 19, 2015, 08:24:02 PM »
Only buy it as an investment, one that you would put that much money into, without the desire to live on it.  I personally would not leverage to buy a vacant property.   Vacant is a $ in the hole. For taxes and resale costs and such. If you move to follow an awesome job?



I'm guessing the OP is not someone who's going to move away from the area.


OP, how about the best of both worlds? Can you make one of the outbuildings livable? Pull in a used mobile home once the uninhabitable house is down? Presumably the utilities and septic are in place already. Then you have cheap housing to help you get ready to build sooner. It'll also be easier to do any neccessary work to sell the current house if it's empty.

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3265
  • Location: State: Denial
Re: Buy property to eventually build?
« Reply #20 on: June 19, 2015, 09:45:31 PM »

I've thought about the renting route, but it worries me a bit.  If I know I can sell it, I'd prefer to off load it and not have to worry about a rental.  Rentals get a little scary around here with a lot of hired laborers.  I really just don't want the headache associated with it,and I'm not sure it'd be enough to cover my mortgage anyways.
I should have been more clear--I meant to sell your current home/land, and you live in a rental for a few months while your new house is built.  I didn't mean to imply that you should rent your current property out.

What area do you live in?

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #21 on: June 20, 2015, 07:40:09 PM »
Only buy it as an investment, one that you would put that much money into, without the desire to live on it.  I personally would not leverage to buy a vacant property.   Vacant is a $ in the hole. For taxes and resale costs and such. If you move to follow an awesome job?



I'm guessing the OP is not someone who's going to move away from the area

 Correct. We wont be moving out of the area.
none of the buildings can be made into living space without considerable inputs.
and there are new laws regarding septic tanks...we will have to put new in, however,  the well on site is still in good condition, so thats 10k we dont have to spend!

OP, how about the best of both worlds? Can you make one of the outbuildings livable? Pull in a used mobile home once the uninhabitable house is down? Presumably the utilities and septic are in place already. Then you have cheap housing to help you get ready to build sooner. It'll also be easier to do any neccessary work to sell the current house if it's empty.
[/quote]

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #22 on: June 20, 2015, 07:42:02 PM »

I've thought about the renting route, but it worries me a bit.  If I know I can sell it, I'd prefer to off load it and not have to worry about a rental.  Rentals get a little scary around here with a lot of hired laborers.  I really just don't want the headache associated with it,and I'm not sure it'd be enough to cover my mortgage anyways.
I should have been more clear--I meant to sell your current home/land, and you live in a rental for a few months while your new house is built.  I didn't mean to imply that you should rent your current property out.

What area do you live in?
we are  in rural midwest. Rentals are few n far between but we'll be researching that in the near future.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #23 on: June 22, 2015, 10:51:33 AM »
Well, no new news.  I should hear from the sellers today or tomorrow about a price, and maybe a bit more on their time frame. 
Wanted to apologize for my last two responses, they were from my tablet at home, while watching my daughter..and the US Open!  I hate my tablet, I can't type fast on it, and I hate "finger pecking" on those damn touchscreen keyboards!

Should have $600 in commissions this month, my wife gets 3 paychecks next month, and I'll have an additional $650 every month, starting in July, as we are rolling me to her benefits.  Also, when she passes her boards on the 8th, she'll get a 75% pay raise.  July could be a fun month - plus I should have more commissions hitting as well.


TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build? - Update
« Reply #24 on: June 24, 2015, 01:59:28 PM »
Well, just wanted to put this down somewhere.
Our realtor (the one we used to buy our acreage, and revalued it after we had completed all the work we had done) emailed me out of the blue today, saying she had a prospect that might be interested in looking at our acreage.  Obviously, that would move things up substantially.  Obviously, we are going to say yes, and allow it to be shown.

Thinking that it might help us get a better sale price, since it isn't listed, we have a bit more negotiation power, I'd imagine.  Has anyone been in that scenario before?  We would still use the realtor, and not private sale it, as a courtesy.  Plus, I would imagine the commissions would be split between buyer and seller, as she'd be representing both. 

The biggest wrinkle is if they do offer something that we would accept, do we try to negotiate to a time frame in which we could move right into our house - which might turn the seller off if they are looking for a place more immediately.  If not that, rentals in our area are very, very limited.  Both of our parents live close, both easily within driving distance of our places of work, and while I know we'd be welcome, I really don't want to go that route.  Thoughts?

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3265
  • Location: State: Denial
Re: Buy property to eventually build?
« Reply #25 on: June 24, 2015, 02:52:47 PM »
Do you have any idea how long it would take for a new home to be built on the property you want to buy?

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #26 on: June 24, 2015, 03:12:08 PM »
Do you have any idea how long it would take for a new home to be built on the property you want to buy?

6-8 weeks to be built, would have foundation poured in the down time, and they'd have to build garage/porch (depending on floor plan) on site after the house is set.  My wife and I have talked about modular homes, and the plans we like - her one main point is that she wants the basement studded and sheetrocked before we move.  For those that have sheetrocked, we all know why - the dust goes everywhere, and there is nothing that you really can do about it.  So, we typically do that work ourselves, however, it could be hired out and done in a few days as well, after the house would be set.

If they make an offer, and IF the people selling the other land are willing to part with it before expected, it IS possible to do.  However, I don't want the time frame to push a potential buyer down the road.  I can actually think of a house or two in town that might be rentable, on a month by month lease.  We'd be paying sub $500 a month to rent, probably sub $400 in all honesty, versus our current $650 mortgage.

On top of that, if we DO get an offer and DO get it sold, we'd have no student loans payments either, which will put $350 a month back in our pocket as well.  Not a terrible plan.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4983
  • Age: 34
  • Location: Seattle, WA
    • My blog
Re: Buy property to eventually build?
« Reply #27 on: June 24, 2015, 06:08:37 PM »
I've seen a variation of this question come up a few times. Five years is a long time to be sitting on a piece of land that you aren't using. The money you spend on that land will not be working for you during that time; instead you'll be paying property tax and will likely have other expenses keeping the vegetation under control and other maintenance. In addition to that, your life circumstances could change during that time. In five years you might not actually want to move out there anymore at all!

My advice is to wait until you're almost ready to actually move there. Look around at the properties for sale at that time. You'll likely find one that is basically as good as the one you're looking at now, but someone else will be paying to maintain it between then and now.

kendallf

  • Handlebar Stache
  • *****
  • Posts: 1065
  • Age: 53
  • Location: Jacksonville, FL
Re: Buy property to eventually build?
« Reply #28 on: June 24, 2015, 08:56:15 PM »
I'll just share our personal story with a similar buy; yours may turn out differently, but just something to consider:

I am a car guy, I have a daughter who loves animals and horses, and in 2005 or so I started looking for acreage to build a small house, a big garage, and maybe have room for a horse.  I'm a cyclist and every time I rode outside of town, I'd look at "For Sale" signs.  Eventually I found a new horse ranch development about 20 miles north of my job; the lots were ~5-20 acres in size, there were horse trails, an excellent fresh water lake, and we bought a 9.5 acre plot for $130k in 2007.

I refinanced my house to get the down payment on the land, figuring I would just sell that house in a couple of years and use the proceeds and a construction loan to start building, because of course my current place would keep appreciating, and they aren't making any more land, you know?

You're probably already sensing this isn't gonna end well, and you'd be right.  The housing market crashed, the developer went bankrupt, my home and the property both were deeply underwater.  I couldn't sell my house, I couldn't build, and I couldn't sell the property. 

It wasn't the end of the world.  I had steady income and could pay the mortgages (and the HOA fees; the damn property has a HOA!) 

I have to say though that I'd consider that my biggest financial mistake ever; I was over leveraged and dependent on appreciation for liquidity (i.e., to be able to sell the old house).  I'm just now preparing to put that house on the market, after eight years of paying both mortgages and watching trees grow on the property.  The land is still worth only a fraction of what I owe on it.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #29 on: June 25, 2015, 07:30:16 AM »
I appreciate all the input guys, I really do.  The hard part about this is they are going to let it go, cheap.  With that, it is the ONLY acreage within 10 miles of where we want to end up at that is on blacktop, instead of gravel, with no confinements in the immediate area, so no smell to deal with!

In my latest update, you'll see that my realtor who I had used to revalue our house after I had completed the work had emailed me yesterday, saying she has someone who is looking for an acreage in the area in which we currently live.  Knowing that we are planning to sell down the road, she wanted to see if we'd be willing to let her show the house. 

After discussing it with me wife, we decided that it isn't going to hurt anything, and if they are interested in buying it, we have a bit more wiggle room since we don't have the immediate need to sell.  I should hear back more today from her, and get a showing scheduled.  If they do have interest in it, and make an offer, we'd have to find a place to rent, and then we probably WOULD be buying that acreage and getting a house put up, while we're renting.  The sale of our house would clear my mortgage and my student loan debt, leaving us debt free (no car loans, no credit card bills), well, almost debt free.  We have a small $1,200 financed at 0% for some new furniture that we put in our basement (yes, anti-MMM, I know).

Anyways, that's the latest.  I'll post when I know more, and again, honestly, thank you for all of the opinions that everyone has had.  I really do appreciate them.

skunkfunk

  • Handlebar Stache
  • *****
  • Posts: 1057
  • Age: 33
  • Location: Oklahoma City
Re: Buy property to eventually build?
« Reply #30 on: June 25, 2015, 01:35:57 PM »
I appreciate all the input guys, I really do.  The hard part about this is they are going to let it go, cheap.  With that, it is the ONLY acreage within 10 miles of where we want to end up at that is on blacktop, instead of gravel, with no confinements in the immediate area, so no smell to deal with!

In my latest update, you'll see that my realtor who I had used to revalue our house after I had completed the work had emailed me yesterday, saying she has someone who is looking for an acreage in the area in which we currently live.  Knowing that we are planning to sell down the road, she wanted to see if we'd be willing to let her show the house. 

After discussing it with me wife, we decided that it isn't going to hurt anything, and if they are interested in buying it, we have a bit more wiggle room since we don't have the immediate need to sell.  I should hear back more today from her, and get a showing scheduled.  If they do have interest in it, and make an offer, we'd have to find a place to rent, and then we probably WOULD be buying that acreage and getting a house put up, while we're renting.  The sale of our house would clear my mortgage and my student loan debt, leaving us debt free (no car loans, no credit card bills), well, almost debt free.  We have a small $1,200 financed at 0% for some new furniture that we put in our basement (yes, anti-MMM, I know).

Anyways, that's the latest.  I'll post when I know more, and again, honestly, thank you for all of the opinions that everyone has had.  I really do appreciate them.

I'll add that I've had a coworker do almost exactly this. He lives quite a ways from the office, but he pulled it off fine. They eventually sold the house and property and are now living a bit closer in an older, smaller, less expensive house that he is remodeling bit by bit.

Certainly worked out well for him. Worked out so well that he's considering doing it again.

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #31 on: June 26, 2015, 09:27:23 AM »
I appreciate all the input guys, I really do.  The hard part about this is they are going to let it go, cheap.  With that, it is the ONLY acreage within 10 miles of where we want to end up at that is on blacktop, instead of gravel, with no confinements in the immediate area, so no smell to deal with!

In my latest update, you'll see that my realtor who I had used to revalue our house after I had completed the work had emailed me yesterday, saying she has someone who is looking for an acreage in the area in which we currently live.  Knowing that we are planning to sell down the road, she wanted to see if we'd be willing to let her show the house. 

After discussing it with me wife, we decided that it isn't going to hurt anything, and if they are interested in buying it, we have a bit more wiggle room since we don't have the immediate need to sell.  I should hear back more today from her, and get a showing scheduled.  If they do have interest in it, and make an offer, we'd have to find a place to rent, and then we probably WOULD be buying that acreage and getting a house put up, while we're renting.  The sale of our house would clear my mortgage and my student loan debt, leaving us debt free (no car loans, no credit card bills), well, almost debt free.  We have a small $1,200 financed at 0% for some new furniture that we put in our basement (yes, anti-MMM, I know).

Anyways, that's the latest.  I'll post when I know more, and again, honestly, thank you for all of the opinions that everyone has had.  I really do appreciate them.

I'll add that I've had a coworker do almost exactly this. He lives quite a ways from the office, but he pulled it off fine. They eventually sold the house and property and are now living a bit closer in an older, smaller, less expensive house that he is remodeling bit by bit.

Certainly worked out well for him. Worked out so well that he's considering doing it again.

Glad to hear it's at least worked for someone :)
If they do end up looking at our house, and offering enough that would cover the rest that I owe on the mortgage, and my student loans, I'll be hard pressed to not sell it.  Hell, we'd be completely debt free bringing in 4k+ a month, and our only real bills at that point would be daycare at $500.  Obviously, there'd be utitilies and stuff, but rent is even going to be cheap in our area. 

I'm actually kind of hoping they come and look at it, and give us a solid offer.  We could still buy that acreage, rent for $300-$500 a month in a new place, and start getting the nitty-gritty done with floor plans, foundation, cleaning up the acreage, etc.  Essentially, getting our ducks in a row while savings a LOT of money - selling and paying off the aforementioned bills would leave us a net increase of $1k a month that isn't being used for those bills.  Take out possible rent - worst case scenario is we are savings $500 a month more than before.

Plus, DW will pass her boards in two weeks, and my checks will increase by $600 due to benefit changes.  It'll be nice....I should say, it COULD be nice.  Not trying to count my chickens before they hatch.

RichMoose

  • Pencil Stache
  • ****
  • Posts: 966
  • Location: Alberta
  • RiskManagement
    • The Rich Moose | A Better Canadian Finance Blog
Re: Buy property to eventually build?
« Reply #32 on: June 26, 2015, 11:53:37 AM »
Assuming the sale of your current property doesn't happen, is there an option to rent out the garage space on the new property to generate at least some income?

TheInsuranceMan

  • Bristles
  • ***
  • Posts: 389
Re: Buy property to eventually build?
« Reply #33 on: June 26, 2015, 12:22:48 PM »
Assuming the sale of your current property doesn't happen, is there an option to rent out the garage space on the new property to generate at least some income?

Not really sure who would rent it, or why they'd rent it, but, it's a possibility, if someone was interested.  It wouldn't generate much income, probably just some hassle.  But, it is a valid idea, and I thank you for that.

No new updates yet, just looking up at my gmail "tab" every 10 minutes, seeing if I have a new email from my realtor or not.  Oh, I mean, I'm working, really, really hard.