buying land w/house vs. building

Discussion in 'Homesteading Questions' started by Gypsy, May 19, 2004.

  1. Gypsy

    Gypsy Well-Known Member

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    Hello Folks,

    Well, we’re kind of bummed because the place we were trying to get a mortgage for didn’t appraise for the contract price so our mortgage fell through. The banker said that our credit was fine but the house’s siding needed about $15k worth of work and was therefore not a good investment for them or any mortgage banker, so maybe it was for the best. Not to be distracted from our goal however, we hopped right back on the horse this past weekend and went out looking for a new place. Now we’re back to trying to decide between finding a place with a house already built vs. finding the land we want w/o house and taking a construction loan later once we’ve built up some equity in the land. Any suggestions? Thanks in advance.
     
  2. SueD

    SueD Well-Known Member

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    I'm not sure I'm the one to be answering, but here's our idea anyway...

    We WANT to build, but we aren't really particular as to whether or not the property already has housing, and here's why...

    If it DOES, then there is something to live in while we save and put more down with a builder. Since DH and I can do most of the work, we could concievably be able to build for mostly cash that way. If it doesn't, we have the option of finding a trailer (IF we're lucky) to put on it, or start building right away.

    I always try to leave as many options open as I can no matter what I do, so since the house thing isn't a MUST have, that leaves plenty of room for flexible planning.

    We've looked at both, and what we have been TOLD (not sure I believe everything, but this makes some sense) is that the taxes will go up disproportionately if we build where there was no building to begin with, but more in proportion if we do a tear-down at a later date.... If that's right, it is probably because they assume there were things like utilities and such, and so new ones are not necessarily counted in the assessment?? I don't know... But it made sense at the time.

    Also... since I'm used to spending most of my time in a tent, my concern is more that the land will support what I want to do, than to make sure I have housing. And, the older the house (though the more desireable in my personal rose-colored-glasses eyes), the more work and problems.

    Sue
     

  3. mikell

    mikell Well-Known Member

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    You could buy the place with a construction loan and do the repairs yourself. I've done it many times. And better yet you could probably get in for less than 1000$. Check with your banker again.

    mikell
     
  4. Amy Jo

    Amy Jo Well-Known Member

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    I'd check to see if the seller will negotiate on price or put money towards repairs at close, or bump the price up with repairs already done.

    I wouldn't build right now. I already have a contract on our home, but was told that newly contracted homes -just like mine - are seeing a price increase of almost $10,000 because of materials going up in price.

    I think you'd get more for your money in an already built home.
     
  5. Gypsy

    Gypsy Well-Known Member

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    Thanks for the advice but the woman (seller) actually has decided to take the place off the market. She is getting some kind of “fix-it-up” loan/grant to help with the improvements and then she will be obligated to live in the house for I think at least 3 years. We have a beat on another place now that we are going to see tonight. Wish us luck!!!
     
  6. Zuiko

    Zuiko Well-Known Member

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    I think your better off finding a 'livable' house, then spending the money you would on a new house, on the old house. Usually if you buy a place with a house, you will get buildings with it. Otherwise you could down the line, put a new house on it, after you find out what you need better, and what you like about the old house, etc. Buildings are expensive. I would find a place you like with nice buildings, in a good area, and an okay home.
     
  7. Janon

    Janon 993cc Geo Metro

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    Build vs. buy may be a regional thing. Where I'm currently at, you could build for the same price as buying a comparable home. I know some rural areas where you get a much better value when buying an existing home.

    cheers,
     
  8. Mel-

    Mel- Well-Known Member

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    I think janon is right, it might depend on the area you are looking in. Right now in central indiana, we have so many foreclosure on homes less than 6 years old that you can actually buy one of them for about $40k less than it would cost to build a new one JUST LIKE THEM.

    I am in a slightly different position than most at the moment. My parents have a farm that had an older second house on it that was only being used for a barn. Was liveable only in the sense that it was weather proof and you could flush the toilet once a day (on a good day twice). So, I didn't have to buy this place but also don't own it and have the use of 3-5 acres of pasture if I want. I have put about 15k in it over the last 3 years and will need to put another 3-4k to finish the rest. I have put in all new windows, doors, insulation, roofing, flooring, wall coverings, ceiling, plumbing, wiring. Basically I almost gutted the place. Still, even though it's only 800 sq ft, that 800 sq ft would cost me a minimum cheapest materials and builder I could find of $56k to build new and that isn't counting the land costs or septic system.

    I am always looking for a place farther out in the country and will be looking for a similar type house, one that needs a lot of work, because that is the only way I will be able to afford as much house and land as I would like to have. There is an older home right now I would be thinking about if it were further out in the country, 1900 sq ft, brand new two car garage, 3 bed/2 ba, new vinyl siding and windows. It still needs a new roof and the inside hasn't been touched in 30 years. But they only want $79,500 for it with almost 3 acres and probably can be had for $70k or less since it is a foreclosure. A new house like that would cost approximately $15k per acre in this area plus $70 a sq ft minimum for the house and $6-10k for septic plus driveway and garage.

    Of course, mobile homes aren't allowed here and even double wides are hard to get permits for so the options are limited in terms of cheap housing.

    Mel-
     
  9. chickflick

    chickflick Well-Known Member

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    I know this ISN"T your question.. BUT.. (you could even think on this for future places you may find):
    Maybe the seller would be willing to negotiate a Owner carried Note/Mortgage? If the banks won't loan on the appraised value.. he won't be able to sell it to anyone else unless he uses another way. And he should probably come down on his price as well. UNLESS someone offers him cash.. do you have some way to come up with the money other than the bank loan? Be creative.. there might still be a way.
     
  10. Gimpy_Magoo

    Gimpy_Magoo Well-Known Member

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    we had purchased some land with the intention on building on it. Then materials took a huge leap in prices. Kansas is very proud of it's lumber.

    We gave up on building a home and started looking within 5 miles of the property for an old fixer-upper. we found one within a mile and it was a bank repo to boot. great price and in good shape. We purchased it and plan on MOVING the house to the property within a few years. This will be far cheaper in the long run to do than building. The bonus is we can move the water meter also, saving us approx $4,000 in new meter installation costs at the property.

    Gimpy
     
  11. Zuiko

    Zuiko Well-Known Member

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    Also you can ask the selling realator if he knows of somebody who would get him a morgage. There was one house were were considering, nice buildings, older house, very cheap, but it had only wood heat, the selling realator told us of a particular bank that would do it. Then we could replace the heat, and re-finance, if that was a crappy rate. It was very cheap but the closest neighbor was in the front yard!, I think he built a new house, then sub divided it. We are happy where we are now though, its a little further, but its a bigger and nicer house, and the closest neighbor is 1/4 mile down the driveway and across the street.
     
  12. surferchick

    surferchick Guest

    I agree with Janon - it all depends on the area you're in. We looked at buying land and building, but it just didn't make sense. 1 acre to 1.4 acre lots are going for $50,000 and up here. Add to that the cost of taking in a dirt road (at about $37/foot - our county no longer does this service for free and most of the vacant land that's available has no access to it), wetlands surveys, endangered species surveys AND the cost to move those species to a protected area (a certain $ amount per animal based upon the type of animal), the cost of clearing the land, permits and such, and fill dirt.......... we'd be out a huge chunk of money before we even got around to building the house. We instead bought an existing house on an acre and a half and are doing some remodeling that will greatly add to the already high value. It was much easier getting a loan as well.
     
  13. Mike in Ohio

    Mike in Ohio Well-Known Member

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    It really depends on the specific properties you are looking at rather than a general rule of thumb. If you found the perfect property, without a house, at a price point you could afford...would you pass it up?

    On the other hand, if you found a property that wasn't particularly noteworthy would you buy it just because it had a house?

    Our farm only has a small cabin on it. We will eventually build a house but if need be we could live on the property as-is for extended periods. I think the decision is very much a personal one and general rules (build or buy) aren't very helpful.

    As usual, just my 2 cents.

    Mike
     
  14. shakeytails in KY

    shakeytails in KY Well-Known Member

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    In most cases, it's probably cheaper to buy a place with an existing residence. For one, you have a place to live without paying rent or 2 mortgages(like I'm doing). I'm not into "roughing it", I like electricity and running water. Also, in the case of farms and small acreages, there are likely to be barns, outbuildings and at least some fence in place.

    Building is very expensive, most people tend to underestimate the costs and hassles(permits,etc.) involved. And material prices have gone through the roof lately.

    We bought land with 2 trailers on it, and promptly sold them both. I hate trailers! It also has an old barn, which we use for hay only. We built a big horse barn(36x84) with an attached apartment (24x24) that we're very close to moving into. It cost about 30,000- BUT we only have about $4000 in paid labor in it(septic, electric service, plumbing rough-in) and that was some very cheap labor rates (friends). We also bought most materials before the big jump in prices. DH is a carpenter, and we already had most of the tools and know-how, and I bargain shopped to death for things like appliances, cabinetry, light fixtures, etc. In the county I'm building in, there are also no permits required, though the septic and electric have to be inspected.

    The place I'm living in will go on the market for about $80,000. 10 acres, 30 x60 horse barn, 1100 sf 2br old house with lovely mature shade trees. There are also a storm shelter and 2 other outbuildings. When everything is mowed and trimmed, it looks like a little estate. In this county(only a couple of miles from the new farm) permits are required and there's a lot of hassles to build. If this were bare land it would sell for about 30-40k (lots of road frontage). The barn would cost about 8k in materials or 15-20k to have built. Fencing would run at least a couple thousand. Septic would be at least a couple thousand. I have no idea what it would cost to drill a well, I'm sure it ain't cheap. Then add a house of some sort. A trailer would bring you in under the cost of my property, but they depreciate in value, have little or no aesthetic value, and are tornado magnets. Did I mention I hate trailers? :) You might get into a double-wide for 40, if you get a very low end model. If you could build a similar size house yourself probably 50-60. This old house needs some work, but most of it is very thick log walls, and it's solid!

    Also, interest rates are low now, but what if they're 9-10% when you're ready to build. Ouch! I know I'm being pessimistic, but too many people I know have gotten sticker shock when the realize how much it cost to build or remodel. JMHO, of course.
     
  15. fin29

    fin29 Well-Known Member

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    Up here in Maine, building is expensive, and lots are not exactly cheap, either. We just sold some raw acreage for over $10,000 an acre in central Maine.

    www.realtor.com is great-you can search by town and surrounding communities. It's how we found our place. You're almost guaranteed to pay less by buying an existing house and land.
    The Maine Farmlink program might be of some help to you as well. It pairs prospective farmers with people looking to get out of it. A lot of times, the deal includes equipment and accounts. While you do have to have previous farming experience, what qualifies for that is pretty loose.
     
  16. Qvrfullmidwife

    Qvrfullmidwife Well-Known Member

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    If it were between building from scratch or renovating, I would definitely renovate.

    However, I do have to disagree with the comments made about "trailers". The attributes mentioned date from the 70's...or at least the trailers made in the 70's. Trailers (or manufactured homes as they have been called since HUD began regulating how they were built) will appreciate like real property when placed on private land and properly anchored to a permanent foundation. Studies done from varied institutions (Harvard among them) have indicated that mobiles aka manufactured homes do not reduce the value of surrounding property. As with any home, there are good as well as shody builders. As far as being tornado magnets, well, not necessarily. There have been numerous reports of them faring as well, if not better in some cases as site built-stick built homes during Hurricane Andrew. As far as the aesthetics...well, I guess that depends upon taste. I have seen them with cedar or log siding as well as brick or stone. They even come in two stories, now, with garages. So...whatever you do...do your research. Ask around, but also read, read, read and plan. Know yourself...how much labor or money are you able to invest in your property...for our family, as much as we would like to think that we could move into something that needs significant renovations, or even building from the ground up (whether site built or the prep needed for a new manufactured home, the truth is that with eight (going on nine) children more would be left undone than done and we really want to hit the ground running, if you know what I mean. So we continue looking for the right place, with the determining factor being "can we handle this", knowing from our research exactly what we can and cant handle.

    (oh--my comments regarding trailers come from someone very happy in a 30plus year old stick built-site built house who has done research into trailers...'just in case'. Many of them put my house to shame in construction and curb appeal, not to mention energy efficiency.)
     
  17. RAC

    RAC Guest

    I respectfully disagree about trailers and manufactured homes--they can depreciate and bring down the value of the properties around them if the city/county isn't smart about where to allow them. They look really tacky when used for infill housing on odd-shaped lots left in tracts because they do not resemble the houses next to them (I personally think that infill lots should be used as small neighborhood parks). And I doubt the studies take into account the number of times people just discount them out of hand when told what they are (much like you would rule out houses with in-ground swimming pools if you don't want one).

    The only exceptions would be perhaps if they were in an area where it makes sense to put cheap housing--like at the coast or other flood-prone areas. Maybe that would reduce Flood insurance costs as well....

    While it is true that you CAN purchase manufactured homes with add-ons and such that look nearly identical to site-built, almost no one buys them unless the codes in the area are so restrictive as to how houses "look" like they belong within a neighborhood, and at that point you might as well go with site-built when you see the price after adding everything up. Even the newer ones that you see for the most part have that mobile-home look due to the really low roof line.
     
  18. Qvrfullmidwife

    Qvrfullmidwife Well-Known Member

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    There is a big difference in anecdotal evidence and what the evidence of the market actually shows.

    Regarding property values...what I stated was not my opinion/experience, but the result of varied studies that I have read. (Not where I can put my hands on them right now...you can probably do a search) My personal experience in what does and does not impact property values comes from being married to the president of the home owners association in the 1100 home subdivision where we are currently living. We have stringent deed restrictions. They cover everything from lawn furniture, edging and color of homes to what you can and cannot park in your driveway. Children's play equipment is restricted as is the number of pets that one can have, the materials used on the home and the fencing used. It is one of the most strict complilation of regulations in the area. Nearly 6 years ago our neighborhood (before my husband's tenure) took a resident to court for erecting on the perimeter of their property a 7 foot tall chain link fence. This home is on the main street through the neighborhood, in fact virtually at the entrance, one of the first things that a potential buyer would see upon entering the neighborhood. It was a clear violation of one of the restrictions which stated that fences could not be erected in front of the house. The rationale behind the intense enforcing of the deed restrictions was that they "preserved the property values". The neighborhood lost, the resident won in court. They are allowed their fence as long as they live there. Subsequently, they have not maintained their yard, they have continual piles of refuse behind the street. They have been cited by the city repeatedly, to very little avail. The property values in the neighborhood, specifically of those homes that share property lines with this home have not dropped...they have skyrocketed. Furthermore, as we have looked for property it has been interesting to note that a manufactured home of comparable size and condition on equivalent acreage is within 5K of the asking price of a site-built, stick-built home. No difference in appreciation or property value there, either. From the discussions that we have had with numerous realtors, police department as well as the city council what impacts property value is not so much the neighboring properties as much as it is the proximity of the homes to places of employment, medical care, etc and issues such as crime as well as the general economic health of the area. From the research that we have done, we have not seen trailers aka mobiles aka manufactured homes or their new cousins, the modular home affect the property values of neighbors...unless thay are a crack house. What we have noticed is a pronounced stigma attached to them which seems to be residual from days of poor construction and poor maintenence. Never-the-less, while we have heard much which appears to be visceral responses about how they depreciate and reduce neighboring property values, our observations after much study has been that overall, a well maintained, well built manufactured home placed on private property on a permanent foundation does not impact property values in such a fashion.

    But this is besides the point of the original question...it seems to almost always be easier and cheaper to renovate than build new, either will take time and money, but renovation seems to at least take less of money and can posibly take less time, depending upon how it is handled. :)
     
  19. Qvrfullmidwife

    Qvrfullmidwife Well-Known Member

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  20. RAC

    RAC Guest

    Thanks for posting the links. I think too that the building unions have also had a hand in how manufactured homes are perceived. And, there is a big difference between say, a manufactured home park next to a site-built tract as opposed to manufactured homes on acreage next to site-built homes on acreage. The biggest concern about manufactured homes I would have is their longevity and if they cost more to insure (some trailer parks, for example, make you move your trailer if it is too "old"), I think site-built is 50 years (not sure)?

    If the value is mostly in the land and where things are located, then you're right--it may not matter so much what is on it, and the quality of the manufactured homes is getting better. But of course it probably varies as to area. Absolute dumps in San Francisco go for outrageous prices because they're in San Francisco--that does not hold true in much of the rest of the country. And I don't even know if they allow manufactured homes in SF, or other expensive places like say, Carmel or New York City. I can't remember offhand any celebrity having a manufactured home being built anywhere...lol.

    I seem to recall also that often when you remodel an existing house and leave at least one original wall standing, your taxes don't go up as much. Something to look into at any rate at your county/city offices.