Author Topic: Crazy to buy land and build?  (Read 1690 times)

trashmanz

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Crazy to buy land and build?
« on: April 27, 2016, 06:34:28 PM »
Just came across an opportunity and haven't done all the due diligence yet, but just thought to run some thoughts by you folks.

I'm looking at some land in a nice wooded area which is in a HCOL location that would otherwise be very expensive to buy with a home already built on it (e.g., houses starting around 550,000).  I may be able to purchase the land for around $100,000.   Lovely area, great schools forest all around.  House used to be on lot but home burned down, so potentially shouldn't be impossible to get permits to re-build something similar (~1300 square foot home).  I already live in a primary residence a bit under 2 hours away and would drive in to work on house/oversee construction etc.

Potential issues:
HCOL area, building costs may be high and may be hard to get a quality builder due to the housing boom.
Located on sloped land, may be more expensive to build.
County is fairly strict on permitting, so not sure how many hoops to jump through there.
Could pay for land in cash, but then would have to take a loan/HELOC to do the construction (yeah, risky I know but finances are ok, not far from FIRE already and could survive this cost I think). 

On the plus side:
Homes selling around $420 sq. feet in area.
Nice school district.
15/20 min to town
Would be great retirement home.
Location is great.
Already was a home on the land just a few years ago, so hookups are less of an issue than undeveloped land (hopefully).

So under one scenario, it would seem that estimating 150 sq/ft for construction and 1300 sq. ft home would cost ~200,000.  Total investment not including personal time overseeing would be ~$300,000, but should be worth potentially $600,000.  Should be enough wiggle room there in the numbers to make it worth the risk perhaps?  Admittedly is more of an emotional decision rather than a strictly financial one given the risk, but just wanted to see some thoughts?  Once the house is built we would probably just rent it out until FIRE.  I don't have any experience building homes but do have people with experience that I can get advice from.



fishnfool

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Re: Crazy to buy land and build?
« Reply #1 on: April 27, 2016, 06:46:56 PM »
A friend of mine did the same thing and it worked out well when he sold the new house he built to upgrade to another project. But the soils and engineering work did catch him by surprise when he went through the county permitting process. That is something you should research before laying down your cash. Especially with a sloped lot!

trashmanz

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Re: Crazy to buy land and build?
« Reply #2 on: April 27, 2016, 06:57:09 PM »
Very true.  Some potential problems here to be sure.  But still tempted to go for it.  Probably because I think it would be such a nice place to live.  There are other better ways to turn a buck for sure but I think its always nice if something can be more than just an investment, e.g., if it turns out I have to live here. 

SDREMNGR

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Re: Crazy to buy land and build?
« Reply #3 on: May 04, 2016, 04:57:57 PM »
I'm sure there will be lots of challenges ahead and you'll learn a lot and in the end, will get a nice house for cheaper than you'd have paid for it, and you'll either love having done it or you'll hate it.  Good luck.