Author Topic: would you buy this? house + building lot , planing 5 years ahead  (Read 1598 times)

TheBeeKeeper

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we are planing on selling our house in about 5 years, and moving further from the city.
We just heard of a property that will be listed soon, and it's in a perfect location for us! Exactly where we would be planing to move.
It has a 3br 2 bath house + a big empty lot for building. The house  is pretty old and would need some renovation, like replacing old carpets and painting.
The property owner(house  + extra lot) wants 260K, the lot is worth no more than 40k

Our current house is worth 350K and has 200K mortgage

If we buy now, we were thinking of renting out the house (can probably get 1,500$/mo) and in 5 years build a new house on the lot.

To fund the purchase we would need to either get a mortgage for the rental, or HELOC on another rental property we own (worth 250K, no mortgage, rents for 2K/month)

So in 5 years (or less) we would sell one of the rental properties (or both.. ) , pay back the money taken out of the HELOC, sell current house, move into a newly built house funded mostly from our current home sale.

Does this make sense, or are we crazy going into this adventure when many things could change in 5 years?
What would you do differently?


Ayanka

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #1 on: January 18, 2017, 11:32:29 AM »
I would get an inspection, to know what needs to be done, because it is probably going to need some more work you don't see. And cosmetics is not the big cost, as you probably know. Secondly, I am not sure, I would want to borrow that much money for real estate in current climate. If the lot is only worth 40k, it seems like it is not a highly desirable area, which may become a problem if you need to sell. I don't know the whole picture, but I would rerun the numbers, before making a decision with my heart and I speak from experience.

TheBeeKeeper

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #2 on: January 18, 2017, 11:38:50 AM »
If the lot is only worth 40k, it seems like it is not a highly desirable area,

real estate in general is relatively cheap, it's a rural area, and plenty of land
It's a college town, so lots of transient population, and the area almost did not suffer from the 2008 housing crash.
So we're not worried at all about having problem to sell. There is always demand here for houses, and this one has very good location.

TheBeeKeeper

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #3 on: January 18, 2017, 11:41:49 AM »
I would get an inspection, to know what needs to be done, because it is probably going to need some more work you don't see.

would definitely get inspection before signing anything
the numbers in my post assume there is nothing big to fix besides cosmetics and carpets
Of course if we find out we need to replace all the sewage pipes and electricity, the whole plan would collapse.


Ayanka

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #4 on: January 18, 2017, 12:21:02 PM »
Grins, sounds like you did your research.

Another Reader

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #5 on: January 18, 2017, 04:21:01 PM »
In your shoes, I would wait until I was ready to move.  Things can change dramatically in five years. You are tying up money that can be invested more effectively and buying a property that does not cash flow well.

bosspross

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #6 on: January 18, 2017, 07:02:23 PM »
I agree with other posters. based on the numbers you gave the cash flow is not great/you might just break even. Also, there is always something more that comes up than just carpet and paint whenever you end up buying a "pretty old house". How long have you guys been looking for a house in the area? If you have been looking for 4-5 years and you feel like this is the perfect house and you don't mind losing money on it in order to have in 5 years from now go for it. If you have only been looking for a year or two I would let it go. Besides having an empty lot to build on and being further from the city what else makes this the perfect place for you?
« Last Edit: January 18, 2017, 08:36:01 PM by bosspross »

TheBeeKeeper

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #7 on: January 18, 2017, 09:13:35 PM »
Besides having an empty lot to build on and being further from the city what else makes this the perfect place for you?

the empty lot is a big bonus, since we would be getting it virtually for free. Similar houses in the neighborhood are sold also in the 250K ballpark, without having extra lot. Land is abundant here, each lot is about 2 acres.

The location is perfect because of immediate access to parks and bike paths that make commuting by foot/bike super easy while still being > 5 miles away from anything nearly urban

TheBeeKeeper

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Re: would you buy this? house + building lot , planing 5 years ahead
« Reply #8 on: January 18, 2017, 09:17:46 PM »
You are tying up money that can be invested more effectively and buying a property that does not cash flow well.

because of the poor cash flow, the plan is to sell the old house sooner than later, and keep the lot for future building. If all goes as planned we would be getting for selling the house similar amount to what we would have paid for it with the lot