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Message
Buying land to build on in the future.
Posted on 2/4/20 at 7:23 am
Posted on 2/4/20 at 7:23 am
We are looking at two possible lots in Tennessee that we would hopefully build on in the future.
Neither are terribly expensive.
One is roughly 2.5 acres for $70k, the other would be 5 for no more than $135.
My questions are what do I need to know about buying a second plot of land that might easily be overlooked. We have a mortgage and no other debt, Credit score over 800, yearly income is roughly 1.5x the amount remaining on our mortgage.
What kind of rate would I be looking at for a second plot of land?
What don't I know?
I need your experience and expertise.
Neither are terribly expensive.
One is roughly 2.5 acres for $70k, the other would be 5 for no more than $135.
My questions are what do I need to know about buying a second plot of land that might easily be overlooked. We have a mortgage and no other debt, Credit score over 800, yearly income is roughly 1.5x the amount remaining on our mortgage.
What kind of rate would I be looking at for a second plot of land?
What don't I know?
I need your experience and expertise.
2
Posted on 2/4/20 at 9:19 am to Displaced
We bought some land a few years ago for this purpose. Vacant land loans are not like home loans, shorter terms usually. Check with lenders on this and shop around. We took out a 2 year loan and if i remember correctly had to go one more year on it to complete the payoff.
Posted on 2/4/20 at 9:23 am to way_south
What kind of rates can I expect? We would be able to do a two year payoff on if we bought the smaller lot, but probably 3-4 on the 5 acre lot.
Posted on 2/4/20 at 9:34 am to Displaced
Check with your smaller banks and credit unions. Usually the bigger banks wont deal with raw land unless you agree to a construction loan. Rates are between 4.5 and 6.5 depending on the term. I recommend going for a 10 to 15 year and pay more monthly to target a 3-5 yr payoff. This gives somewhat of a safety net if you need it for future reasons and allows to pay that lower note on a vacant piece of property.
Posted on 2/4/20 at 10:13 am to Displaced
I would understand the maintenance requirements if in City Limits/POA. Not sure if needs to be mowed/bush hogged.
May need to have some kind of umbrella insurance policy, in case you have trespassers.
I would make sure I understood any right of ways through properties like pipelines, drainage, etc. This can impact where you can build driveways and structures.
What is property zoned for and does that match what you want to do with it.
May need to have some kind of umbrella insurance policy, in case you have trespassers.
I would make sure I understood any right of ways through properties like pipelines, drainage, etc. This can impact where you can build driveways and structures.
What is property zoned for and does that match what you want to do with it.
Posted on 2/4/20 at 11:01 am to lsu13lsu
Thanks.
The bigger lot is totally overgrown and has a 1930s deathtrap on it that has been abandoned since like 1970. It would have to be completely demolished.
The smaller lot is fully cleared and flat and has already passed a perc test I gethered from speaking with the owner.
Both are residential. Not sure about local city limits.
The bigger lot is totally overgrown and has a 1930s deathtrap on it that has been abandoned since like 1970. It would have to be completely demolished.
The smaller lot is fully cleared and flat and has already passed a perc test I gethered from speaking with the owner.
Both are residential. Not sure about local city limits.
This post was edited on 2/4/20 at 11:03 am
Posted on 2/4/20 at 11:13 am to Displaced
You are probably going to end up with a shorter term and a slightly higher rate than you realize when going into this. This is more of a traditional "bank loan" than what a residential mortgage is. Look around as each banks program for this will probably be different and many banks do not even provide this type of loan. Your smaller local banks or rural ag banks will be the best place to go for this.
Posted on 2/4/20 at 11:21 am to HYDRebs
I bank with NFCU and they own our mortgage. I know I need to shop, but would you guys think a smaller local bank would offer better rates?
Posted on 2/4/20 at 1:33 pm to Displaced
quote:
Not sure about local city limits.
As an example, some cities require residential lots to be mowed no less than 4 times per year. POAs may require monthly. Just something you may need to know. It may not be an issue for you at all but I have seen it when people live far away from their lot.
Posted on 2/4/20 at 1:39 pm to lsu13lsu
I'm going to assume that it is not an issue as the two properties are about 1 mile apart and the large lot is totally overgrown 
It is definitely something I will look into though
It is definitely something I will look into though
Posted on 2/4/20 at 10:20 pm to Displaced
Yes as most of the bigger banks don’t offer this product. You can probably find up to 15 year loan if your looking for longer terms. Again you’re going to be all over the map with what type of programs each bank offers. Some are interest only some adjustable and some fixed. Don’t be shocked with rates in the mid 5’s up to 8%. Again this is more of a traditional bank loan and seen as more risk than a traditional residential mortgage.
This post was edited on 2/4/20 at 10:21 pm
Posted on 2/5/20 at 8:31 am to Displaced
quote:
he bigger lot is totally overgrown and has a 1930s deathtrap on it that has been abandoned since like 1970
This is going to cause you major issues with insurance providers and loans. It will make it much more complicated. Your best bet would be to negotiate the bulldozing of it with the purchase, although I'm not sure how it will work.
Banks don't like major insurance liabilities on their loans.
ETA: Not sure what your current equity would be, but you could potentially do a cash out refinance or HELOC in order to finance the land. Certainly some risk in that, but then you could potentially own the land outright and just owe more on your mortgage.
This post was edited on 2/5/20 at 8:33 am
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