Pull the trigger on land to build on

[tsmith321]

I found a few pieces of land in well established communities at I thought would be great to stash for future dream home. The lots range from 80-90k for around an acre. Homes range from 500-600k in each community. At this time we aren't ready to build, but I know the land will not be available when we would be come 5-6 years. We have roots in the community, being business owners, and our dream is to build a house rather than a re-sale.

My wife tends to think holding land of that value could ding us on taxes. We live in SC.

I'm curious as to any advice you guys can shed on this topic.

Thanks

[robartsd]

Holding the land will be a drag on your finances (property taxes, maintenance, insurance/libability). Is the opportunity to build your dream home there worth the cost?

[Spork]

I don't know where you are looking or what is available... but around here, you can find rural land that qualifies for agricultural tax exemptions. 

We live on about 8 acres.  One acre gets taxed with the house.  The remaining acreage costs us about $30 a year in taxes with ag exemptions.

[waltworks]

The tax hit is one thing, the opportunity cost is another. If you're not going to use the land for anything for 5+ years, I'd say there's a chance you will *never* use it (think about where you were/what you were doing 5 years ago... life happens).

I bet there will still be land when you are ready to buy it. And if not, buy an existing house. It's just a way to keep rain off, right?

-W

[Field123]

The tax hit is one thing, the opportunity cost is another. If you're not going to use the land for anything for 5+ years, I'd say there's a chance you will *never* use it (think about where you were/what you were doing 5 years ago... life happens).

I bet there will still be land when you are ready to buy it. And if not, buy an existing house. It's just a way to keep rain off, right?

-W

Exactly. The holding costs of vacant land in south carolina should be very low. (Under $1,000/yr I'd assume). However, as Walt suggests, its the opportunity cost of what else you could be doing with your $90,000 that will cost you

[adamcollin]

 You should analyze your financial condition and then take the final decision.   

[Mr. Green]

Holding the land will be a drag on your finances (property taxes, maintenance, insurance/libability). Is the opportunity to build your dream home there worth the cost?

Look into the local laws regarding liability on vacant land. Often times appropriately placed no trespassing signs are enough to prevent liability claims. That means no insurance costs. Alternatively, some insurance policies extend liability coverage of a homeowner's policy to any vacant land in the same state. The caveat there is it must be truly vacant, not even a little shed.

[fishnfool]

I'm gonna go against the grain and say follow your dream. It sounds like a desirable area and if you can afford it, go for it!

[piethief]

I personally have done this and would not recommend others do it.  Things change, plans change, jobs change, marriages dissolve, etc... between buying the land today, and building the "future home" in the future.  Also, land often does not move very well so if you do change your plans, it might be hard to sell unless you got a screaming deal.  Your only buyer pool will be other people with enough financial wherewithal to buy land and build a house on it.

[kendallf]

I bought about ten acres to build my dream home.. in 2006.  Just before the bottom dropped out of the real estate market around here.  Still have it.  Still paying the mortgage, HOA dues,  and taxes.  It's worth some small fraction of what I paid.  Haven't built out there yet.  Don't know if I will.  I'd love a do-over on that idea.  🙂

[Dancin'Dog]

Some locations appreciate over time and would have been a good thing to buy early, but most land doesn't.

Most likely lots in a development have been divided into small parcels and marked up as high as the market will bear, so you can't expect it to appreciate much more.

If you want land in a location that will become more scarce over time, like waterfront property, then it might make sense to buy in now while it's available and you can afford it. 

If that's the case I'd recommend looking for a lot that is large enough to subdivide into 2 or more lots later.  I have a lot that like that and it's worth more with a 40 year old double wide on it than the neighboring lots with 8000 sq ft homes, with 4 car garages, and pools, also waterfront.  Each new home makes the remaining lots more valuable.