Vacant Land in downtown Philly: Sell or Keep

[Chanelle Henry]

Hello everyone, I know what the initial answer may be on this, but at the age of 34, I'm facing some financial issues that really started as soon as I found out I had a lot of health issues that would cause me to lose my job and go into a greater debt than I would have liked before starting grad school. I currently owe about $140k+ and raising, and this includes student loads were are currently being deferred, but I also own a vacant lot in Philly that was reassessed by the city this year (because of big improvements) and it's worth $175k. My credit score went down 200 points in the last year, I'm smart with tons of IT and tech skills but can't seem to get a job and I was wondering what to do? Can I keep this property and somehow Manley residual income on it? Should I sell it and try to invest in another city I possibly like ? Is if possibly to get a real estate investor to fund building on the property, or is that not common? Please help!

[Sam LLoyd]

I think the answer comes down to mindset.  A vacant lot is an inflation proof savings account.... you don't want to use your savings to pay off debt, especially if you haven't fixed whatever caused the debt in the first place.  On the other hand, a savings account is also there for any unforeseen circumstances. If this is a medical emergency, then pay it off and be thankful you had it.  However, it sounds more like you need to fix your financial situation first.  You need a job, or source of cash-flow that can cover your cost of living and your debts... then look at the different uses for your 'savings'.... don't blow it all on a problem that hasn't been solved.

Another way to look at the vacant land (I have a vacant lot that I'm trying to figure out what to do with too), is that if you are paying taxes on it every year, it's a liability.  Also, there is the opportunity cost of having your money in land when you could have it in a cash-flow producing asset.  As I am trying to do right now, I would recommend getting that money out of the land and into an asset.  I don't know much about your market, but if 175k could buy a condo that brings it a couple hundred/month... that would be better than leaving it there... and you can probably find better investments than that.

Summary:  Get your finances in order.  Get to a point where your income exceeds your expenses, and then decide what to do with the lot... my recommendation would be to put the value into a positive cash-flow property.  Yes, finding a builder who will build on it should be doable, but how to work that to an advantage other than just taking the money.... that's not my thing.