Author Topic: Buying Vacant Land  (Read 4245 times)

Kaplin261

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Buying Vacant Land
« on: June 13, 2015, 04:44:51 AM »
Has any one parked some money using vacant land? I would think that  at a minimum it could beat inflation. The risks are low,no maintenance, nothing to fix verses owning rental property with a home.

There might also be a opportunity  to create income with the property, timber harvesting, hunting rights, recreational usage, farming and storage.

My DW and I plan to FIRE in 12 years. We currently live in Richmond, Va in a crowded suburb. We have a 19 month old and would like to have some where we can camp on a couple weekends out of the year. We also want to get out of the hustle and bustle of the city when we retire so the land would also be some where we may build a home on. We are currently looking at land between Richmond and Chancellorsville Va as close to a interstate exit as we can get. 5-10 acres for $25,000 or less. Taxes would be about $100 a year.

I would do my research before buying and wait patently for a deal that is under market value. How would this compare to say if I should park the money in a Vangaurd fund for 10 years instead? Recreational use would offset the small amount of taxes paid each year.

Mrs. PoP

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Re: Buying Vacant Land
« Reply #1 on: June 13, 2015, 05:27:42 AM »
We bought a vacant residential lot on a saltwater canal about 4.5 years ago with the intention of holding it for appreciation.  Prices just now are starting to move, so we'll probably wait until we have a lower marginal tax rate and sell it in FIRE.

Some thoughts given that experience so far. 
- Don't count on prices keeping up with inflation (at a minimum).  Land can stagnate for a lot longer than home prices.  It'll start to increase when other people want to build on it.  But if you're planning on building on it, why would you care about appreciation over inflation?
- Contact your insurance company that holds your homeowners policy and see what would be covered under that policy.  For us, it's *most* of our lot, but not any structures on it.  So our seawall and dock would require a separate policy.  We had to make the choice between paying that or carrying a little bit of liability risk on them. 
- If you're going to operate a business on the property, your homeowner's probably wouldn't cover you at all and you'd need a separate insurance policy. 
- Also make sure that you won't have any utility bills.  We pay a $41/month customer charge for the privilege of water and sewer pipes running under our vacant lot, not providing any service to it.  =/


Kaplin261

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Re: Buying Vacant Land
« Reply #2 on: June 13, 2015, 06:04:34 AM »
What would be the purpose of home owners insurance on vacant land?
« Last Edit: June 13, 2015, 06:07:36 AM by Kaplin261 »

Thegoblinchief

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Re: Buying Vacant Land
« Reply #3 on: June 13, 2015, 06:14:00 AM »
Zoning, zoning, zoning. Do due diligence here.

If planning to build, are there utilities? Find out costs of installing them or figure on going off-grid.

Read up on wells.

If planning on gardening or orchards, do a soil test.

I've seen a number of stories where people bought land for more than $0 but found out for various reasons it was essentially worthless (zoning, invisible environmental damage, no access rights because surrounding property owners controlled access, etc)

Another Reader

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Re: Buying Vacant Land
« Reply #4 on: June 13, 2015, 06:31:29 AM »
The purpose of insurance is to protect you from liability claims.  Someone chases a rabbit onto your property, trips on a tree root, and sues you for damages.

MrsPete

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Re: Buying Vacant Land
« Reply #5 on: June 13, 2015, 06:40:15 AM »
Land isn't necessarily easy to sell.  If I were going to do this, I'd buy land that's uber-popular.  For example, lakefront property in a prime neighborhood. 

Yes, you'll need insurance, though it won't cost all that much.  If someone were to come onto your land (even without your permission, even if you've posted no trespassing signs) and hurt himself, you could potentially be sued.  This is especially true if you intend to allow others onto your property for the aforementioned money-making ideas. 

I have problems with hunters coming onto my land without permission.  They leave a mess (for example, five deer minus their heads), and they shoot where they please.  We used to be able to catch them pretty easily: we have only one road leading into the property, and they'd park their truck there at the entrance and walk in ... now they have four-wheelers, which take them into the woods, and we don't always know they're on our land.  It's scary to think what could potentially happen; we're located within a mile of a school, and bullets can travel a long distance.  These hunters are brazen and will lie to your face:  "Oh, I have the owner's permission to be here."  "This is my uncle's land."  "I've been hunting here for years and no one's ever said anything to me!"  Okay, that last one might be true. 

And don't underestimate taxes.  $100/year sounds impossibly low, and I live in rural NC.  I own 45 acres of farmland, and even with a HUGE portion of my taxes deferred because the land is actively farmed, I'm still paying a good bit more than that.

And, yes, be 100% sure of the zoning.  I would be more willing to buy land in a neighborhood than rural, raw land.  Neighborhood lots are more likely to sell. 

And be sure of what regulations you're agreeing to when you buy.  For example, if a developer wants to get a neighborhood up and running, he may require that you build on your new land within X number of months.  Some land can only be divided X number of times (that's a big one out where I am because they're encouraging people to keep family farms intact instead of parceling them out among 8-10 cousins).  Land can be restricted in ways you might not imagine. 

Overall, I don't think this is a great idea. 
« Last Edit: June 13, 2015, 06:46:29 AM by MrsPete »

Spork

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Re: Buying Vacant Land
« Reply #6 on: June 13, 2015, 06:52:13 AM »
Has any one parked some money using vacant land? I would think that  at a minimum it could beat inflation. The risks are low,no maintenance, nothing to fix verses owning rental property with a home.


This depends on what sort of land you're talking about.

If you just have 100 acres of woods in the country... maybe there is no maintenance assuming no fences and you're not doing some sort of controlled burns every few years like the forest service recommends.

If you have plots of land in the city, there are a lot of cities that are still going to apply some amount of code enforcement.

My father owned a vacant lot for years.  At random times the city would "notify" him that the lot needed mowing.  This means hiring a guy with a Bush hog (in my dad's case: me) to come over and mow.  There were always a ton of fallen branches to pick up and stumps to mark ....   It was often 2 full days of work for a 1/2 acre lot.

I might also  mention:  His city's "notification" was to place a notice on a 3inch x 5inch card, staple that to a wooden stake and hammer that in facing the street.  Even if you were looking for it, you are likely to miss it.  Dad lived next door (but never saw the lot from that angle) and would probably never have seen it if the across the street neighbor didn't see the inspector putting it out.

Kaplin261

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Re: Buying Vacant Land
« Reply #7 on: June 13, 2015, 07:42:14 AM »
Land isn't necessarily easy to sell.  If I were going to do this, I'd buy land that's uber-popular.  For example, lakefront property in a prime neighborhood. 

Yes, you'll need insurance, though it won't cost all that much.  If someone were to come onto your land (even without your permission, even if you've posted no trespassing signs) and hurt himself, you could potentially be sued.  This is especially true if you intend to allow others onto your property for the aforementioned money-making ideas. 

I have problems with hunters coming onto my land without permission.  They leave a mess (for example, five deer minus their heads), and they shoot where they please.  We used to be able to catch them pretty easily: we have only one road leading into the property, and they'd park their truck there at the entrance and walk in ... now they have four-wheelers, which take them into the woods, and we don't always know they're on our land.  It's scary to think what could potentially happen; we're located within a mile of a school, and bullets can travel a long distance.  These hunters are brazen and will lie to your face:  "Oh, I have the owner's permission to be here."  "This is my uncle's land."  "I've been hunting here for years and no one's ever said anything to me!"  Okay, that last one might be true. 

And don't underestimate taxes.  $100/year sounds impossibly low, and I live in rural NC.  I own 45 acres of farmland, and even with a HUGE portion of my taxes deferred because the land is actively farmed, I'm still paying a good bit more than that.

And, yes, be 100% sure of the zoning.  I would be more willing to buy land in a neighborhood than rural, raw land.  Neighborhood lots are more likely to sell. 

And be sure of what regulations you're agreeing to when you buy.  For example, if a developer wants to get a neighborhood up and running, he may require that you build on your new land within X number of months.  Some land can only be divided X number of times (that's a big one out where I am because they're encouraging people to keep family farms intact instead of parceling them out among 8-10 cousins).  Land can be restricted in ways you might not imagine. 

Overall, I don't think this is a great idea. 

I think in the state of Virginia no trespassing signs are adequate to prevent liabilitys with people getting injured.

With the hunters trespassing and leaving dead carcass this  is not a huge money hit. I would be more worried of people dumping trash and debris on the property.

Hiring a responsible hunter to manage your 10 acre investment and payment being in the form of exclusive hunting rights. Is a free way to have a little more security for that land  that be a hour away.

I would also treat buying vacant land like I would buying a rental property with a home, lots and lots of research and plenty of patience for a deal under market value.

jba302

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Re: Buying Vacant Land
« Reply #8 on: June 13, 2015, 07:46:57 AM »

Yes, you'll need insurance, though it won't cost all that much.  If someone were to come onto your land (even without your permission, even if you've posted no trespassing signs) and hurt himself, you could potentially be sued.  This is especially true if you intend to allow others onto your property for the aforementioned money-making ideas. 


In premises liability, the only duty owed to an unknown trespasser is to abstain from willful / wanton misconduct. This means you can't hide a bear trap on a route that appears to be traverseable by foot, or put spikes on a quad route, things like this. Additionally, your standard homeowners insurance coverage E (personal liability) would activate for this sort of thing, unless there's a specific exclusion (these vary by state so take a look).

Things you can do: set boulders to prevent quads, set barbed wire along the perimeter. If someone sued you for tripping over a root and broke their leg, it would be a very fast dismissal. A simple "I've never met this person before, they were trespassing" along with posted No Trespassing signs is sufficient. All the absurd trespasser-won-lawsuits have odd facts to them, and are constantly overturned on appeal if the homeowner loses.

MrsPete

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Re: Buying Vacant Land
« Reply #9 on: June 14, 2015, 07:09:40 AM »
I forgot about dumping garbage.  Yes, people do that.  The worst, though, is that the state dumped A HUGE QUANTITY of road-debris on our property -- I'm talking about torn-up aspault chunks.  That was a mess. 

Hiring a hunter won't keep others from coming onto your property. 

We can't set boulders to block the road without ALSO blocking out farm equipment that we want to come onto the property. 

The big picture:  Maintaining land is more effort than the OP imagines. 

Bicycle_B

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Re: Buying Vacant Land
« Reply #10 on: June 14, 2015, 01:48:16 PM »
+1 to the comments about location, zoning, taxes.  Real estate results vary widely based on such factors.

Here's an idea:  Research the cost/benefits of owning vs leasing/borrowing vs purchasing options on property.  Contact individual owners near properties for sale, get their opinions, explore to find cost-efficient ways of meeting your goals with minimal capital investment.  At least be able to distinguish between the risk/reward of specific propositions compared to average deals in the relevant market.

Remember the old poker saying: If you don't know who the fool is at the table, it's you.

I think that "properties of 5 to 10 acres" are similar to horse trading and poker in that they reward insiders and people with experience at the expense of newcomers. 

Bicycle_B

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Re: Buying Vacant Land
« Reply #11 on: June 14, 2015, 01:57:10 PM »
PS.  From what I can tell, examples of ways to "park" money in land that are more profitable than raw land include storage facilities, well-run campgrounds, and some hunting leases. 

Logically, it's not clear to me that land by itself would beat inflation.  It seems more likely to keep pace.  Most of the value in land is based on use, use varies with society's income, therefore the value of land ought to be in proportion. 

Since changes in use account for most increases in value, raw land that just "parks" your money might be doomed to lag inflation until you do something with it.  At that point, you didn't "park" your money, you left it idle until you became a real estate developer.  More efficient financially would be looking for the development opportunities up front.  TAANSTAAFL.

That said, it might be possible to find land where you get additional enjoyment from using it while your development plan is in process.  Of course, it might also be possible to purchase/barter to obain that enjoyment much more cheaply by leasing, renting, borrowing, exchanging favors, doing part time work in the country, or just plain camping.