Author Topic: Should I buy my neighbour?  (Read 1850 times)

Leroy_tabane

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Age: 39
  • Location: Québec
Should I buy my neighbour?
« on: January 07, 2021, 09:18:02 AM »
Ok, so here's an important dilemma I have: As I posted in my journal, I am building a house on a 17 000 square foot lot where I live. Been here for 10 years or so and the lot adjacent to mine has always been vacant, it's wooded and untouched by man. I have always been interested in buying it for at least control over my neighbor (or the absence of it) but more and more I think that there is great opportunity for me there. Since I live there with all my tools and garage, I could build a house on that lot by myself for REALLY cheap. An then, renting it would be super convenient. I would own two new houses side by side. Sounds like a dream to me.
The thing is that the price has always been way higher than what I would be comfortable paying. I have been in touch with the owner over the years and he is really a special guy... I've heard stories. He's a millionaire 83 year old guy who own a lot of land in the region and he is well known by most here for that, and his character. He is very conservative with his money and will fight for a penny. So I call him every year or so to inquire about the lot and he was always interested to sell but it's always been too high to my taste. About 8 months ago he put it on the market. I appreciated that he came to see me first to tell me though as he new I was interested. He is selling it for 125 000$ witch is at the top end of the spectrum for comparable lots here. The selling agent told me that he already refused an offer at that price. I think he likes me though and that would give me a small edge in negotiating. By that I mean I could probably have it for 125 000$
Just saying it sounds ridiculous to me paying that much for that lot. I still have a 100 000$ mortgage on my property and doubling it scares me. I feel I would lock myself in a 9 to 5 job for even longer by doing that.

Am I missing the obvious here? Should I buy it even at that price. For reference, I paid 120 000$ for my house 10 years ago. Municipal evaluation of the lot only was 20 000$ then the year after I bought it went up to 97 000$. same thing for the adjacent lot. Because of that I feel that prices are somewhat inflated here. The city is coming our way more and more.

I'll leave it like that to start the conversation. Thanks for reading!

Leroy
« Last Edit: January 07, 2021, 09:21:24 AM by Leroy_tabane »

joenorm

  • Stubble
  • **
  • Posts: 127
Re: Should I buy my neighbour?
« Reply #1 on: January 07, 2021, 08:11:47 PM »
I was in your same position not too long ago, for about the same price. I too thought it was a lot to pay but I did it anyway.

While I don't regret it at all, you definitely should have a plan for it. 125K is a lot to pay for a few trees, or in my case just a bigger lawn. Property taxes are a real thing for me now. Plus I have power and water I now have to pay for.

But it gave me more space, and a lot of potential. If I find its not right in near future I could easily recoup costs.

I'd like to build or put a small rental on it, at least to cover some costs for the time being.




Duke03

  • Bristles
  • ***
  • Posts: 371
Re: Should I buy my neighbour?
« Reply #2 on: January 07, 2021, 10:59:40 PM »
My theory when it comes to land and even lots is this...If you buy it today and even if you pay the asking price.  In 10 years someone will ask what you paid for that land.  When you tell them how much you paid they will say damn you stole it!!!!

Leroy_tabane

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Age: 39
  • Location: Québec
Re: Should I buy my neighbour?
« Reply #3 on: January 08, 2021, 06:18:35 AM »
I really appreciate your replies guys, they align with what I have been spinning in my head since yesterday. After I posted this thread, I actually called the owner.  He removed the lot from the market but at one point he told me: I like you and what you are doing with your house and if you fax me an offer for 125 000$ I will sell it to you (yes he said fax). After a month or so, it will be incorporated in a company for my succession so my kids will have it and if they sell it, it will not be under 150 000$

So anybody knows how to use a fax machine?

But seriously, the fact that he refused an offer for 125 000$ tells me that worst case I could turn around and sell it like @joenorm said. You both are right and this deal is not as "make or break" as I might have been thinking. I think I will make that offer.

I have a plan for the lot laid out in my head but I will put it on paper and see how it looks first. Maybe I will post it here and see what reactions I get!

uniwelder

  • Bristles
  • ***
  • Posts: 256
  • Age: 41
  • Location: Virginia
Re: Should I buy my neighbour?
« Reply #4 on: January 08, 2021, 06:32:38 AM »
How familiar are you with the building requirements for that lot?  Before things get too far, you might want to talk to someone in zoning to be sure everything in your plans will be doable--- setbacks, septic, well(?), etc.  I realize you live next door and have built a garage on your property and renovated (with addition) your house.  So you're definitely familiar in some regard, but with new construction versus your older existing house, there may be new requirements (septic perc standards for example) that could surprise you.

I'm curious what the selling situation is.  Its a little confusing, though I don't know anything about Canadian norms.  This guy put it on the market with an agent and has had competitive offers, is taking it off the market and willing to sell to you, but no formal contract yet.  Has he taken it off the market so he can fire the agent and sell directly to you afterward?

edited to add--- You're concerned with doubling your mortgage payment and what that will do to your saving rate.  With that in mind, how much extra cash will you have per month to pay for the construction of the house?  How long do you think it will take before its finished and can be rented out?  Also wondering how many trees will have to be cleared out to make way for the leach field of the septic system.
« Last Edit: January 08, 2021, 06:53:07 AM by uniwelder »

Leroy_tabane

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Age: 39
  • Location: Québec
Re: Should I buy my neighbour?
« Reply #5 on: January 08, 2021, 09:39:03 AM »
Hi @uniwelder , I agree it's complicated. The guy is one of a kind too. I heard stories where he would agree with a price verbally with a buyer and right at the time of the official signing, he changed his mind. The agent he has is taking care of all of his lots, like I said, he has some kind of system to sell some every year and that's what happened with the adjacent lot. He sold some elsewhere so he do not need to sell more this year. He has many, not just around Quebec. He's probably one of the biggest land owner in the region. Also I did all the research, in this street we have aqueducts but no sewage so I need a sceptic system and it will be complicated because the water table is less than 3 feet from ground. Otherwise, the lot is constructible as of 2 or 3 months ago when I checked with the municipality. I will provide my detailed plan once it's complete and you can look at it here. I value your inputs and I have to say, man there is a lot of wise peoples on this forum!

Fishindude

  • Magnum Stache
  • ******
  • Posts: 2737
Re: Should I buy my neighbour?
« Reply #6 on: January 08, 2021, 02:28:41 PM »
I've purchased a couple neighboring properties and paid a premium just to clean up some dumpy places and to keep the riff raff out in the future.
They've all been good decisions, I don't regret it.

bacchi

  • Walrus Stache
  • *******
  • Posts: 5559
Re: Should I buy my neighbour?
« Reply #7 on: January 08, 2021, 05:39:54 PM »
We're probably going to buy a lot next door to ours to avoid a 3 story behemoth going up. We'll remodel and/or build a sensible house on it and sell or rent it.

draco44

  • Bristles
  • ***
  • Posts: 253
Re: Should I buy my neighbour?
« Reply #8 on: January 08, 2021, 10:16:45 PM »
You don't mention how much of a stretch this would be financially for you to make the purchase, other than the scare of how this buy compares to your mortgage, so do consider that overall picture carefully. But to me the fact that is is a purchase you're are still considering after YEARS of thinking about it says something important about how much you want the land. It doesn't sound like you'd be making this purchase on a whim.

Would you still really want the land even if you never build a house on it to rent out? If so, that's a much stronger case in my mind to buy than if you'd only go through with this as Step 1 in a many-part rental investment plan. As others point out, there could be unanticipated complications with building your own rental property. And even if building process itself is smooth sailing and you start immediately with an eye towards getting rental income as soon as possible, during the build you'd be in the position of paying for your mortgage, this new land, and building materials/permits all at the same time.

former player

  • Walrus Stache
  • *******
  • Posts: 6321
  • Location: Avalon
Re: Should I buy my neighbour?
« Reply #9 on: January 09, 2021, 03:41:44 AM »
I bought the house next door because developers came sniffing around and the trend around here is to put big expensive houses on any available lot, and the disruption of a build and end result of an oversized monstrosity next door would reduce the value and living standards of my house.   Fortunately I had the money I needed on hand and didn't feel any loss from spending it.  It rents out easily (although not for the 1% people here say is necessary!). No regrets.

NonprofitER

  • Stubble
  • **
  • Posts: 219
  • Location: Texas
  • Reaching FIRE w/ High Purpose (Low Pay) Nonprofit
Re: Should I buy my neighbour?
« Reply #10 on: January 09, 2021, 09:32:09 AM »
We were in the same boat (empty lot next to us for 8+ years) and we considered purchasing it multiple times. Every time we ran the numbers, we just couldn't justify the premium the seller wanted. We also considered buying the lot and developing on it to sell or rent - a house, a duplex, subdivide into condos, etc. (but having strategic control over where the windows would face towards our house, etc.) -- even then we still couldn't make the numbers profitable or break even!

So, unlike others on the thread, we made our peace with it. A builder purchased the lot, and we got into contact with him early on to implore our privacy preferences. While he did build a huge McMansion on it, he did make some changes to the proposed floorplan to avoid windows right up against our property line - and he paid for a new privacy fence between the lots, and gave us first dibs on deciding the height of the fence and the stain color, etc.. While I miss the empty space next to us, the outcome of having neighbors isn't as bad as I feared. The couple that bought the home are lovely, and none of their windows look over our home (even though its waaaaaaay taller than ours). The biggest impact has been less morning light because the new house is East of us - but I'm glad we didn't spend the $150k.

Just our flipside experience. :)

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 7380
  • Location: Norway
Re: Should I buy my neighbour?
« Reply #11 on: January 09, 2021, 12:46:52 PM »
I would only advise it if you can easily afford it. It shouldn't become a large financial burden for you.
If the landowner insists on selling it for a price above reasonable market price, he will probably not be able to sell it to others either. So maybe will happen for several years.

PMJL34

  • Stubble
  • **
  • Posts: 215
Re: Should I buy my neighbour?
« Reply #12 on: January 10, 2021, 06:43:24 PM »
Is it a boss move/muscle flex to buy your neighbor's lot. You bet.

Is it a smart money decision? No (unless you plan to combine lots and build a huge complex/sell to investor).

Malcat

  • Walrus Stache
  • *******
  • Posts: 5539
Re: Should I buy my neighbour?
« Reply #13 on: January 10, 2021, 07:00:13 PM »
I have no input except to say that the way the thread title is phrased, I keep wanting to reply "depends on how many camels his father wants for him".

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 7380
  • Location: Norway
Re: Should I buy my neighbour?
« Reply #14 on: January 11, 2021, 01:01:50 AM »
I have no input except to say that the way the thread title is phrased, I keep wanting to reply "depends on how many camels his father wants for him".

+1

:-)

dougules

  • Handlebar Stache
  • *****
  • Posts: 2268
Re: Should I buy my neighbour?
« Reply #15 on: January 11, 2021, 11:07:17 AM »
Any news on this, or are you still contemplating it?  I'm surprised nobody's asked this, but how much monthly rent would you expect the finished house to fetch?  That's a big part of the equation. 

Leroy_tabane

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Age: 39
  • Location: Québec
Re: Should I buy my neighbour?
« Reply #16 on: January 11, 2021, 04:23:33 PM »
Ok, I am leaning toward buying it now. I took an appointment with the bank. Although my decision is not final but based on the latest posts, ...he want sheeps, not camels!
But, yes, I can easily afford it. And yes, it's a good incentive for us to just not having neighbors and I wouldn't mind keeping it as it is.  I surveyed the market past few days, which I haven't done in years and oh my god! Lots got ridiculously expensive around here. This might actually be a good deal after all. Although there is not that many lots for sale right now, those that could compare to this one were not selling below 175 000$ (but didn't have threes to cut and 200 10-wheelers of dirt to put in) Another point is that I can cut the trees on it myself, have the stomps removed and put a "clean fill accepted" on it and watch the magic happen. I saw one other lot on my street getting completely filled up in 1-2 years that way, for free. All and all, there is a lot of options and I really feel at ease when I think about buying it now, quite excited actually because since the sell sign came up on it last year, I hade quite a discomfort, especially with the work we are putting on our house. That vacant lot is really part of the reason we are so happy here.
For the rental of the finished house, there is a high demand around here for AirB&B style rentals because it's highly touristic and there is a military base close by for longer term rental possibilities to base personnel on rotation, but I looked up for houses for rent and it plays between 1200$ and 1750$ per month witch doesn't seem much to me but I really don't know much about renting houses.

uniwelder

  • Bristles
  • ***
  • Posts: 256
  • Age: 41
  • Location: Virginia
Re: Should I buy my neighbour?
« Reply #17 on: January 12, 2021, 07:33:23 AM »
This is a little off topic--- On the addition of your house, you put in a basement.  You say the water table is 3 feet down for this neighboring property and that it would need a lot of fill dirt.  Is this property downhill from your house?  Did you need to put in a sump pump in your addition?

theoverlook

  • Bristles
  • ***
  • Posts: 365
Re: Should I buy my neighbour?
« Reply #18 on: January 12, 2021, 08:00:53 AM »
I once bought the empty lot next to my house just to have it stay empty, and never regretted that decision. I once passed on buying a run down house near mine (I was "too busy" to fix it up) and have problems with the neighbor that bought it and have regretted not buying it ever since. It may not be the best financial decision, but if it doesn't tax your finances too much, I would jump on it. I'm in the position now that a neighboring property for $125k would be an absolute no brainer for me.

Leroy_tabane

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Age: 39
  • Location: Québec
Re: Should I buy my neighbour?
« Reply #19 on: January 12, 2021, 08:55:13 AM »
Ok, I'm convinced now. Everything is aligned in my head. Talked to a buddy yesterday that just bought his third house and he asked me the price per square foot, witch is about 5,68$ CAD, he laughed and said "buy it now" and don't even negotiate.

@uniwelder it's uphill and I am concerned that a potential buyer could build "inappropriately" without water control and there is a risk that it could modify underground water behavior and affect my actual property, so another good reason to buy it right there. Also, I have a sub pump in my basement and I used to see the water level rise in the hole when it rains a lot. When I build the addition's foundation I made efforts to put the new drain lower on the addition and drive it directly to the ditch in an attempt to lower the water table around the whole house. I think it worked but it's still early to know for sure. I haven't put back my sub pump since beginning of work and water never rose up higher than floor so far, witch before would happen about once a year (then the pump would do it's job).

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 7380
  • Location: Norway
Re: Should I buy my neighbour?
« Reply #20 on: January 12, 2021, 10:52:23 AM »
If you can easily afford it, then yes, buy it. FIL bought the land on the other side of the road in front of his house many years ago and has always had a nice open view. Maybe that was reflected in the good price he got when he sold the house recently.

BradminOxt19

  • 5 O'Clock Shadow
  • *
  • Posts: 67
Re: Should I buy my neighbour?
« Reply #21 on: January 13, 2021, 02:08:26 AM »
I hope it works out for you. Land is not always a guaranteed return.

I have a friend who bought a very nice lot 20 years ago.  After 20 years of taxes, he finally sold it for about what he paid, plus taxes, so a net loss after all that time.

Another friend of mine just bought a property for cash.  The seller had the land for 18 years...and ended up with a $100k loss, after property taxes, drop in price, etc.  My friend may have made out with a very good deal, but hard to say since land may not always go up in value.

I think the axiom "all the profit you will make on the land is in the purchase price" is more applicable for land than other types of real estate.

Good luck.

uniwelder

  • Bristles
  • ***
  • Posts: 256
  • Age: 41
  • Location: Virginia
Re: Should I buy my neighbour?
« Reply #22 on: February 18, 2021, 10:53:32 AM »
Ok, I'm convinced now. Everything is aligned in my head. Talked to a buddy yesterday that just bought his third house and he asked me the price per square foot, witch is about 5,68$ CAD, he laughed and said "buy it now" and don't even negotiate.

Any update on buying?