Purchase Vacant Lot??

Question

Hello all,

Would like to get your opinions on a situation that has presented itself to me.  My home backs up to a wooded area with a creek.  On the other side of the creek is a vacant lot which ends on the main street in my town.

This lot has been for sale for at least 4 years.  There are other lots adjacent (on each side, also fronted by the main street) which have single family homes built on them.

I'm interested in purchasing this lot because, number one, I don't want anyone building directly in back of my home.  Number two, I may at some point down the road want to build a single or multi-family unit on it and sell them.  Number three, I may want to just hold this lot as an investment.

I don't know if the land percs or not, so not sure if it is even suitable for building.  Nevertheless, the lot is owned by an absentee owner who is a bit delinquent on the property taxes.  They dropped the asking price from $70K to $60K with seller financing available (20% down, don't know the rest of the terms yet).  I can also buy the lot with my HELOC so no seller financing would be needed.

My question to you all is would you buy the lot and if so, how would you finance it?

Mindy Jensen · Answer

@David Lewis , I disagree with the other two. I'd make sure it was a buildable lot before buying it - then I'd make a super lowball offer. If it was worth anything close to $60k, it would have sold in the last 4 years.

What is it worth to you? $10? $30? Not having solid plans for the property isn't a deal breaker, and I wouldn't want anyone building behind my house if I could stop them. It would be worth it to me to hold onto it, but I'd start off really low.

Scott Matthew C. · Answer

@Larry D. Moore I would first ask your local realtor if the lots were ever on the MLS. Find out who the Realtor or Broker was and call them. Ask if there was any interest before going to auction. Ask the Realtor if offers were made on it. If so, ask if they would still be up for buying it at their original offer. If there is a yes from the Buyers go and buy the land. Do your diligence of course. You would only buy the land as long as the buyer will keep his original offer from the past. You will achieve three things by doing this. First, you will make the Buyer happy, second, you will make the Realtor happy, and third, you will profit providing you buy it low enough at the auctions. Make sense?

You can leverage vacant land. However, the lender will most likely give you 30% - 40% against it. You can increase your leveraging power. How? Rent the land to farmers as long as you can show proof of income. It's just like renting Single-Family Houses, except you're renting the use of land to a different tenant, such as farmers or someone that needs land for whatever reason.

If you have vacant landing sitting around, don't expect a lot from your lender.

Larry D. Moore · Answer

@Scott Matthew C. What are your thoughts on purchasing vacant lots by way of tax deed auctions? Then trying to sell them, but if you can’t, aren’t they still useful to borrow against for more investments?

Sam Ball · Answer

you mentioned perc or not. Do you know if there is city sewer at the street? Are the neighbors on sewer or septic? If there is sewer the city may make you hook up when/if you build in the future and that can get exspensive. If you buy it build right away and do it with your primary residence in mind. I'm sure you can come up with something to block the view from your place. Eventually someone will scoop it up if it's buildable and not have you in mind. I would definitely LOW ball it though.

Scott Matthew C. · Answer

@David Lewis I agree with @Jon Huber. Four years is a long time. Having MLS Access could shed some light. For example, if there was ever an offer. You could also see past Listing Agents and call them for info. It's just a thought. All the best - Scott Matthew Courtney

Chinmay J. · Answer

Why buy it from the courthouse steps? That can mean lot of competition with other investors as properties get bid on by investors, and he could end up paying a lot more than he would otherwise. Also, Michigan is a blue state, so I won't be surprised if they have tax liens vs tax deeds, in which case its a super long process to get the property and the owner can clear up the lien to get his rights back.

If I were him strike a deal with the owner to get it at a lower price than whats being advertised. However, it would be worthwhile to get someone to assess the quality of the land to make sure a structure can be built on it in addition to clearing up the red tape (permission from city/county etc)

Pearce G. · Answer

@David Lewis  How much is "a bit delinquent" on property taxes?  Any chance you could buy it on the courthouse steps?

David Stafford · Answer

Hi @David Lewis,

I would have to agree with @Jon Huber on this one. Without knowing anything more than what details you provided, I'd be entirely suspect of a property that's been for sale for four years. You're not the first person to have looked at it and yet there it is. I'd check with the local gov't and ask about the zoning, flood zones, Brownfield, etc. Maybe there's something seriously wrong and that's why no one will touch it. Now, if you're independently wealthy and want to purchase property in order to keep anyone else from buying and building on it, then go for it but again, unless you plan to purchase and improve the land quickly, it's likely a poor investment. Hope this helps.

-dave

Jon Huber · Answer

@David Lewis Would I buy the lot? Probably not. But that is only because my investment strategy is cash flow. A vacant lot is only an appreciation play without any means to get income from it. You could build from scratch, but you'd have to check with the zoning boards to determine what you can build. I think the money put towards an appreciating asset that also provides income is a better move. Just my opinion and what works for me. This may not be your strategy.

Purchase Vacant Lot??

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