Buy vacant lot or pass?

Question

I’m about to free up some capital to invest from a property I’m selling. I live in a small resort town with several restaurants, bed and breakfasts, two golf courses, and very close to skiing.

My question is this. There is a vacant lot adjacent to a duplex I own and a small quaint strip shopping plaza, which has five stores including one of the towns most popular restaurants. It is owned by a nonprofit that I bought my duplex from because they almost went bankrupt and I suspect they are still financially unstable a year later.

I believe I could buy the lot for future development for about $35-40,000 and taxes each year would be approximately $900. I would also have to keep it insured for a nominal amount, probably $500 a year.

The lot could hold a SFH , a duplex or a small commercial building.

Does anyone think this would be a good investment or that I should save my money for a purchase with existing income now such as a SFH or another duplex?

Thanks!

Alecia Loveless

Alecia Loveless · Answer

Hi James, I’d be happy to provide you with whatever information you may need. I’m starting to see some deals coming on the market depending on what you’re looking for in both Bethlehem and surrounding areas. Of course right now if they’re priced right it’s a bidding contest but the numbers are working to go a bit higher than list. Look forward to hearing from you. Alecia

James Peluso · Answer

@Alecia Loveless Hi Alecia, I really like the Bethlehem area of NH. Actually, considering moving in that general area in the future. Perhaps we can connect and you could give me a little more insight on that area. Tx!

Alecia Loveless · Answer

@Jared Maches Hi Jared, for now I’d be looking for appreciation. I’m friends with the restaurant owners and they are currently using the lot as their outdoor dining space during COVID. Which I would be fine with if I owned it and this problem persists into the future.

As it’s located on a state highway there’s good visibility and all sorts of options. I’ve got some other plans first before I would develop it unless the right option came along, such as something with a long term lease that I thought would be a viable long term option.

Thanks!

Alecia

Alecia Loveless · Answer

@Jason Wray Hi Jason, I’m a bit further west from there in Bethlehem. It’s a town of about 3000 in the summer and 2200 in the winter. If I had 20 units to rent I would have no problem finding good tenants as everyone loves the town and the schools are excellent.

We haven’t been hit as badly by the economic downturn as a lot of areas and the real estate market is hot. This is an unlisted lot that the owners may or may not want to sell. The last 3 listed properties I’ve looked at have gone for more than asking price.

I may head to the North Conway area for my next purchase as I think I might be able to get out of the bidding wars.

Thanks!

Alecia

Jason Wray · Answer

Alecia,

I just noticed you are up in the White Mountains! I go there every February to stay and hit the mountains and it's beautiful in that part of North Conway.  Are you talking about a lot that is in the center city by the train center by Zebbs?

Jared Maches · Answer

@Alecia Loveless I think there are a few factors you should look at before going forward. How much would it take to build a duplex from the ground up in your market? What are your market rents? Are you looking for appreciation or cashflow?  This could be a great investment opportunity for the future depending where your market is going.  Personally, I put cash flow on the top of my list but it all depends on what you are looking for.

Best of Luck

Jason Wray · Answer

Alecia,

Any time you can buy adjacent land next to your property you are increasing your real estate market value.  They are not making any more land so in time this small investment will pay off exponentially in the future.  A lot of investors have become extremely wealthy by playing the real life game of Monopoly.  The more you own the more you make towards the end of the game.  If commercial is starting to pop up now its only a matter or time before that land get more and more interested commercial parties looking to make and offer.

Also after you have owner the land for 12 months you can use the current appraised value to offset the Max LTV on a construction loan to build a residential or commercial property