Should I buy the vacant lot next to the house I just purchased?

Question

I just bought a house that I will rehab and rent. The vacant lot next to the house is available at a reasonable price. What is your opinion on purchasing the property?

Julie Rogers · Answer

Steve, Good advice. I felt I could get the price down if I wanted the lot and was ready to wait several months before negotiating more, but!My husband said he wanted the lot, followed by several reasons. For each of his reasons, I had a better rebuttal why not, from advice given here at biggerpockets, and my brother, but I kept my mouth shut and said, Okay. My offer was accepted. I have not exit strategy. If I lived in the area where our rental properties and this lot are located, there are several thing I could use it for, but I don't. Our house next to this lot is probable where we would live if we lived in the area. Not sure when we will leave south Florida.I mentioned to Gary that I would put a shed on the land behind the house for all my tools, and my jeep, and he said he did not want to look out the back screened porch and see any thing other than the woods he currently sees. He said I could put the shed on the lot next to the house, which we did not know was for sale.So I guess I have a place for my shed, one of these days.I want to thank everyone for their good advice!

Steve Haight · Answer

@Julie RogersThought I would comment on this thread. I like what you seem to have going with the lot. I have only bought land in my life and us land guys always look for what you have already available to you. I always put my vacant properties in a land trust or LLC that will minimize your exposure and save you on the insurance. I always buy very low and sounds like the price you mentioned you can pick it up for is somewhere worth entertaining. Check the circumstances of the seller that would give me more to go on but I would negotiate lower yet. Tell me whats up with the seller find his hot button. Describe in more detail your exit strategies.Steve

Julie Rogers · Answer

I really appreciate the professional advice that is being offer! This BiggerPockets is great!

David Luetkemeyer · Answer

Vacant lots in the rental business are an expense and burden that may be hard to sell. It's not a liquid investment. If your exit strategy is to sell in a few years you could get stuck with the lot if the new investor/buyer doesn't want it. Also the expense is more than you think. You will have to mow and keep the property clean. I am a cash flow investor so this may be a biased view point. But if you don't have a plan for the property don't waste the money on it.

Thomas S. · Answer

I would consider buying it based on the value and 2005 values may return but by then your kids will probably own the lot. You will not likely make any money if you hold to resell and I doubt it will add value to your property. Buyers will only see it as raising their taxes. To make money your will need to build on it and sell. Don't buy unless you plan to build.

Robert Nason · Answer

My brother several years ago opted not to buy the lot next-door to his in a commercial area. It ended up becoming a place where a local contractor kept all their waste. My opinion is to buy it. You don't know what you going to get down the road.

Joe Splitrock · Answer

@Julie Rogers lots of factors play into this, but mostly location. Since you purchased in the neighborhood I am assuming it is good. If you are saying the lot costs $6,650 and sold in 2005 for $42,000, then it seems like a steal at that price. Assuming it is close to you in Florida, I would snatch it up. Just market your rental as a extra large lot and have the tenant take care of it. You can sell the lot later or build on it.

Julie Rogers · Answer

Thanks for the advice!My insurance broker says, if the lot has no improvements, my residential insurance will cover liability on the property.

Jay Orlauski · Answer

@Julie - When I think of insurance for a blank piece of land - I am thinking of liability - certainly there is nothing on the property to insure directly - but liability insurance may keep the occasional ambulance chaser from suing you if they are crossing your field and hurt themselves somehow.

Matthew Paul · Answer

Land , they arent making anymore of it . if its a buildable lot , its cheap and the holding costs arent much , I would buy it . You can always build a small house and rent it .