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Started By
Message
Needing advise on potential land purchase
Posted on 3/2/21 at 7:14 am
Posted on 3/2/21 at 7:14 am
Good morning guys. I have browsed this board before and have seen some great advise given to others and thought this would be perfect spot to ask this question:
My wife and I came across a piece of land/lot that we really like. Price of the lot is 60k, has woods and a lake right behind. We have a boy on the way and plan to have two more children and this spot is where we want to build our final home. We both have jobs that we are very happy in.
We are planning on putting 10k down and financing the rest. We do not plan on building a house on this piece of land until 5 or so years down the road when we grow out of the house we have now.
That being said, a credit union I am doing financing through pre approved us and gave me some paper work to sign. I looked over this and the interest rate is 5% with a payment of $435 a month for 180 months. I am not thrilled with that. After all of our monthly expenses we come out with a net of $2,000 per month following a budget. I track our spending in an excel sheet and stick to a budget as well (most of the time), and I just recently discovered the Income Flowchart on here. I know we have the funds NOW to swing that but I also know life can throw you financial curveballs, especially with a child on the way.
Really what I am getting at is do you think this is a stupid move? Any advise is welcome.
My wife and I came across a piece of land/lot that we really like. Price of the lot is 60k, has woods and a lake right behind. We have a boy on the way and plan to have two more children and this spot is where we want to build our final home. We both have jobs that we are very happy in.
We are planning on putting 10k down and financing the rest. We do not plan on building a house on this piece of land until 5 or so years down the road when we grow out of the house we have now.
That being said, a credit union I am doing financing through pre approved us and gave me some paper work to sign. I looked over this and the interest rate is 5% with a payment of $435 a month for 180 months. I am not thrilled with that. After all of our monthly expenses we come out with a net of $2,000 per month following a budget. I track our spending in an excel sheet and stick to a budget as well (most of the time), and I just recently discovered the Income Flowchart on here. I know we have the funds NOW to swing that but I also know life can throw you financial curveballs, especially with a child on the way.
Really what I am getting at is do you think this is a stupid move? Any advise is welcome.
This post was edited on 3/2/21 at 7:21 am
5
Posted on 3/2/21 at 7:18 am to Bronson2017
quote:
Really what I am getting at is do you think this is a stupid investment?
I’m confused...how is this an investment?
you would be buying it to build on it and never sell. That’s not an investment that’s a purchase.
Posted on 3/2/21 at 7:21 am to cgrand
I adjusted, you are correct.
Posted on 3/2/21 at 7:37 am to Bronson2017
if you will build in 5 yrs why would you borrow on the lot for 15?
I would try to see about an interest only loan if available...kinda like a 5 year security deposit
all you are really doing here is taking the lot off the market until you are ready to build
I would try to see about an interest only loan if available...kinda like a 5 year security deposit
all you are really doing here is taking the lot off the market until you are ready to build
Posted on 3/2/21 at 7:39 am to cgrand
quote:
all you are really doing here is taking the lot off the market until you are ready to build
Yes that is the main reason. The 15 year loan is what the paper work read that I was given. That is another reason I do not like it.
Posted on 3/2/21 at 7:52 am to Bronson2017
Ask the Originator for a shorter term loan?
Posted on 3/2/21 at 7:53 am to Bronson2017
That is a good interest rate for land only. I’ve never been a big fan of buying land that early bc of the higher interest rates and having to maintain the land for those 5 years. Also, plans normally change. You likely wouldn’t lose money on the land itself if you decide not to build on it. You would just be out the interest and costs of maintaining it.
Posted on 3/2/21 at 7:59 am to Bronson2017
How close are you living to your work now (same for wife) and how far would this eventual home be from work (and possibly schools)?
If you aren’t ready to build now, I see no reason in buying this land and building (unless you’re in some crazy hot market). Life gets in the way of certain dreams... seems like y’all are falling in love with a lot. Never good to fall in love with property.
If you aren’t ready to build now, I see no reason in buying this land and building (unless you’re in some crazy hot market). Life gets in the way of certain dreams... seems like y’all are falling in love with a lot. Never good to fall in love with property.
Posted on 3/2/21 at 8:00 am to Bronson2017
Best move you will ever make. Land will go up in the long term. The land loan balance will roll into your construction loan when you start building, and from there into your mortgage at move-in, so you're only going to pay on the land for five years. The 5% rate is just OK, but historically, it's solid. Rates are going to go up eventually, and you might well feel good about a 5% mortgage in five years!
Never miss a chance to buy land at a solid price. That's the real key. Is the price good for the piece of land? Does your local area expect growth over time? Does the closest municipality publish its long term street and general development plan? Most do here in Texas, and it is a great way to envision what the area might look like.
As you can probably tell, I've done this before, and my sole regret is that I didn't buy more land when I had the chance.
Never miss a chance to buy land at a solid price. That's the real key. Is the price good for the piece of land? Does your local area expect growth over time? Does the closest municipality publish its long term street and general development plan? Most do here in Texas, and it is a great way to envision what the area might look like.
As you can probably tell, I've done this before, and my sole regret is that I didn't buy more land when I had the chance.
Posted on 3/2/21 at 8:04 am to AndyJ
quote:
How close are you living to your work now (same for wife) and how far would this eventual home be from work (and possibly schools)?
My wife now works from home. My drive will be about 15 minutes. Schools are another reason for our interest in this piece of land, surrounded by great schools elementary - high school.
Posted on 3/2/21 at 8:04 am to Bronson2017
Me personally I wouldn’t put the 10k down. I would keep that handy with a new baby on the way. Your monthly note would be closer to $500.
Posted on 3/2/21 at 8:07 am to TigerHornII
quote:
Is the price good for the piece of land? Does your local area expect growth over time? Does the closest municipality publish its long term street and general development plan? Most do here in Texas, and it is a great way to envision what the area might look like.
I believe it is a solid price. It is located in a spaced out neighborhood tucked back in some woods and surrounded by various small lakes. Potential for a good outdoors life for the kids in the future. The other points you made need to be looked into on my end.
Posted on 3/2/21 at 8:12 am to Bronson2017
quote:
I believe it is a solid price. It is located in a spaced out neighborhood tucked back in some woods and surrounded by various small lakes. Potential for a good outdoors life for the kids in the future. The other points you made need to be looked into on my end.
Quit wasting time talking to this bunch and buy it before someone else does!
Posted on 3/2/21 at 8:16 am to TigerHornII
maybe OP could do 5 yrs plus a balloon and then roll that into the construction note
Posted on 3/2/21 at 8:31 am to cgrand
quote:
maybe OP could do 5 yrs plus a balloon and then roll that into the construction note
What do you mean by balloon? Referring to a rate?
Posted on 3/2/21 at 8:54 am to Bronson2017
I just bought a lot last year. 0% down, 5.65%, 15 year amortization with a Ballon payment after 5 years if it's not transitioned into a construction loan.
Posted on 3/2/21 at 9:09 am to Bronson2017
quote:
tucked back in some woods and surrounded by various small lakes.
Is the land around this lot going to be that way forever or could that land be developed as well?
Posted on 3/2/21 at 9:16 am to Piece
quote:
I just bought a lot last year. 0% down, 5.65%, 15 year amortization with a Ballon payment after 5 years if it's not transitioned into a construction loan.
this ^^^^^^^
Posted on 3/2/21 at 9:17 am to Bronson2017
That’s actually typical for a land loan. Like another poster said, look for a 5 year with balloon payment. The interest rate is still going to be higher than mortgage rates though
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