My wife and I are discussing buying a lot in a vacation area we like. We’ve never bought anything besides a primary residence. We have a normal mortgage on a normal house. We have no car payments, credit card debt, or student loans. We we do not plan on building any time soon, but the property we are looking at is in a different state. We live in TN the property is in NC.
What do I need to know?
What is your goal? Do you have family in the area or maybe some other reason to go there for at least 2 weeks per year? Planning to retire there?
Wifey and I have never bought a vacation property, but everytime we run the numbers on one we learn if we are not renting it out it quickly becomes more expensive than staying two weeks per year in the Paris Ritz Carlton every year for the rest of our lives.
But bought right, you can basically have a free vacation place if you are willing to rent it out. I would find out the cost of property management because you will want that.
We're irrational people on this board. We spend a lot of time and money on cars that are depreciating assets. When we buy a race car, it likely sits still for 99% of a year. Heck, even my daily driver sits empty 90% of the time. It's hard to make good financial choices when it comes to cars.
The stakes are higher with real estate because of the added costs and obligations. But it's also much easier to make good financial choices--to make income from the asset instead of treating it as an expense. Buy a property with that in mind.
Are you looking at buying a lot to build on, or a lot with a house on it already?
In reply to Robbie :
Well bought real-estate will appreciate at the rate of inflation. Real-Estate on water’s edge will appreciate at 2X inflation.
The mantra, Location Location Location really applies to real-Estate. Do not settle for whatever is on the market at this moment. Figure out the best location and buy that.
The market is strong right now. Not the best time to buy. 2010 was the bottom of the market, now unless we have runaway with inflation isn’t going to have any sort of gain for a long time.
Inflation is overdue and the policies being set up are going to feed into inflation but if history is any indicator we are about 7 years away from the sort of runaway inflation we’ve had in the past.
I've been thinking of the opposite. I live on the water in a vacationy area but have been looking at buying some land in the hills of WV.
There has been a ton of new home construction in the past year here and builders are back to buying lots and building spec homes. Of the three empty lots beside me, one is for sale, and the other two are owned by out of staters hoping to build and retire here someday.
Vacant land is a bit harder to get a loan for. That is, it's not hard, but usually requires a larger down payment and higher interest. If you have the home equity it's often cheaper to get a home equity loan to pay for it. Depending on tax rules in your state, this also lets you deduct the interest as it's on your primary residence and interstate paid on the other property isn't. Taxes can seem high if you're used to getting a homestead exemption, but depending on what the tax rules are it can be beneficial over the veeeeeeery long term to be locked in at a lower tax basis.
Most importantly, land gives you something tangibile that you can walk around on and enjoy in a way that you can't with other investments. Whether that's enough to offset the fact that it's traditionalally not a great asset (unless it's your residence or generates income through rental) is really up to you.
I have a cottage and a couple other pieces of property aside from my house. If you have any questions, throw them my way. I'm far from being an expert, but I've jumped through a hoop or two.
A family friend grew up in the Smoky mountains and lived in Chicago for his career. His plan was to retire and build his dream home on a nice piece of land he owned in that area. Once he retired and moved there he found it easier to buy an established home in a neighborhood than tackle building on the side of the mountain. He ended up with a nice place in Maryville, TN and his retirement is going well. Keeping it simple.
Now is a great time to look but a bad time to buy. Never buy in a hot market, you'll over pay.
nderwater said:We're irrational people on this board. We spend a lot of time and money on cars that are depreciating assets. When we buy a race car, if likely sits still for 99% of a year. Heck, even my daily driver sits empty 90% of the time. It's hard to make good financial choices when it comes to cars.
The stakes are higher with real estate because of the added costs and obligations. But it's also much easier to make good financial choices--to make income from the asset instead of treating it as an expense. Buy a property with that in mind.
Boy do you ever have that right. We are wildly irrational. I’ve spent enough money on racing to pay for an extremely comfortable retirement or a very nice home at the lake.
Especially when you consider the time benefit of investment. Over the past 5 decades if I’d tucked the money spent racing in a safe conservative index fund like the DOW I’m willing to bet my retirement would be well into 7 figures
On the other hand what’s a lifetime of fun and satisfaction worth?
I must take exception with your comment about real-Estate. Historically real estate appreciates at the rate of inflation unless it’s a premium location then it can easily appreciate at 2X or more.
The fact that some people lose money on real estate has more to do with emotion and lack of planing than any inherited flaw in real estate.
My only investment that has paid off over my lifetime is the real estate I own
Buy land in Puerto Rico. No property tax.
(Previously, anyway)
OHSCrifle said:Buy land in Puerto Rico. No property tax.
(Previously, anyway)
Yeah, but then you have to spend the tax amount on airline tickets to go visit it.
Toyman01 said:OH ISCrifle said:Buy land in Puerto Rico. No property tax.
(Previously, anyway)
Yeah, but then you have to spend the tax amount on airline tickets to go visit it.
True. Not in North Carolina, either. Reading comprehension failure. Sorry.
Until Octavious comes back and tells us more about his plans, it's all speculation, but assuming you eventually want to build a house make sure you buy land where that will be possible. Is there a well, or the ability to dig one? What are the requirements for adding a sanitary system? Is electrical service readily available? What about natural gas service, or ability to get propane tanks for heating and cooking. Another thing that's become much more important in recent years is internet access.
In reply to OHSCrifle :
One big hint? Taxes are a good thing
The most valuable land is where taxes are high. Connecticut, New York, California, Minnesota.
Cheap land can be found in many locations and taxes there is usually cheap or non existent. If you buy there land will appreciate the least and offer the worst opportunity’s.
I get stuff in the mail pushing vacation property on a frequent basis. Some of it is local, some isn't. Most of it screams "SCAM!" Just be aware of the restrictions/requirements on the land. You may very well be required to use a particular builder and build a house of a particular size/price and complete it by a particular date. Put your feet on the said parcel of land and verify that it isn't under 2 feet of water. Get a quote on flood insurance, if applicable.
Sorry guys we were actually in the mtns of NC looking at the land...
It is a lot in the mtns on a dead end gravel road just off a main paved road. Gravel road is only long enough for the two properties on either side and there is a vacation home on one lot already. It is an elevated lot overlooking a creek. It has a sewer and manhole cover on the road. So I assume it is already prepped for water as well? On the main paved road but down a mile or two from the lot is the towns waste water treatment plant. Which I also assume means city water and not well water? The lot is flat on the front close to the gravel road and slopes more towards the back and the creek. The creek is a year round and the home site is elevated a good 50-75 feet above the creek.
The plans for the property would be to pay off the land and eventually build a small home/cabin with a huge back deck to enjoy the privacy and creek. This would be a vacation home. Not sure on renting at this time, but not against it either. We currently go to the mtns multiple times a year (read 5-10 times for 3-7 days) and had a free house to use except for utilities. That’s changed and we no longer have the house available, so it would cost us weekly rentals to go up there. Since our kids are getting older we would like a place to use with them.
As far as buying the land in our little internet searching last night and today, more than likely try and obtain a home equity loan for the lot using our current house. We actually already have an open one as we put in new windows in our current home last year. We would also consider other options.
The cost of the lot seems fair based on others in the area. For example there are cheaper lots but they are extreme slopes which would require extreme foundations. And there are lots higher up the mtn with better views, but they also cost a lot more. The lot we are looking at is flat and level enough to back a big ole 5th wheel camper or tiny house in there and be good. So it’s pretty flat for a mtn lot.
In reply to octavious :Before getting too invested check out the local crime rate. Both county wide and in the area you are interested in.
Also realize your neighbors can easily make or break your experience.
Is the nearest an officious busy buddy who will want to control your every movement?
A antisocial jerk who intrudes on you and yours?
A nice person who is extremely helpful?
Other issues or attributes?
How far is a good store? Gas station? Hospital? Movie theater? Church of your choice?
The sewer manhole is probably a good indicator but check with the local public works department to make sure. If it has to be extended all the way from the paved road you may end up paying for that. Also, even if there is sewer service that doesn't necessarily mean water service is available - again, check to be sure. A phone call or two to the local authorities should get you some firm answers.
Make sure there will be no code or local restrictions about parking a camper there (or a tiny house, for that matter.) No matter where it's located, since it's a second, non-homesteaded property, property taxes are going to be higher than they would be if it were your primary residence.
Also don't forget that you will be responsible for maintenance...even if it's an unbuilt site for now, there's going to be brush clearing, dealing with trees that fall over, maybe having to mow a spot in the summer or plowing a driveway in the winter, that sort of thing.
Playing devil's advocate here: my parents had a summer cabin when I was a kid. While it was a great place, going there was basically the only thing we ever did for vacation time, we never went anywhere else. And, a fair amount of each visit was devoted to maintaining the place - everything from mowing the yard to putting a new roof on the cabin when the old one wore out. Another thing to consider, looking ahead into the future...when my parents got old, my brothers and I briefly considered buying it from them, but then we realized it would end up that we would be the ones doing all the maintenance and upkeep, while our sister's husbands would only show up to use the boat to go fishing. It wasn't going to be a good long term situation, so we told the folks to just sell the place.
Did it once myself. We bought a lot in a "Lakeside Vacation Community" in WV where the developer had filed bankruptcy. Just a bare piece of land, utilities had not been run around the lake yet. Paid the taxes, etc for 15 years thru a couple different developers until the utilities reached the lot. Sold it for 15 times our investment including the taxes paid over the years.
Have two SIL's who have also done it. One bought a lot in WV. They waited a couple years until electricity was available, put in a well and septic, and built their retirement home. They have been there 3 years now and love it.
The other one bought a vacation home in Sevierville, TN with the idea of renting it out for ~10 years until they could retire and move there. Between rental agent problems, repair costs, etc. they sold it after 10 years at a big loss.
If you have kids about to head off to college, don't do it. I have some property I own outright that I plan on building my retirement house on. The fact that I owned that "extra" land pretty much killed my kids chance of getting financial aid. Sad part was I borrowed against my house to buy the land. They don't count your house against you, just the extra property. If I sold the land and put all of that money back into my house mortgage, she would get aid, even thou, in reality, I'm no richer no poorer either way. Rules are real screwy on what counts and doesn't count when you fill out the forms.
stuart in mn said:Playing devil's advocate here: my parents had a summer cabin when I was a kid. While it was a great place, going there was basically the only thing we ever did for vacation time, we never went anywhere else. And, a fair amount of each visit was devoted to maintaining the place - everything from mowing the yard to putting a new roof on the cabin when the old one wore out. Another thing to consider, looking ahead into the future...when my parents got old, my brothers and I briefly considered buying it from them, but then we realized it would end up that we would be the ones doing all the maintenance and upkeep, while our sister's husbands would only show up to use the boat to go fishing. It wasn't going to be a good long term situation, so we told the folks to just sell the place.
This is true. We spend every summer at our cottage but have only taken a handful of 'vacations' with the kids.
My wife's Grandfather passed and left a cottage to his kids that none of them could afford.
stuart in mn said:Playing devil's advocate here: my parents had a summer cabin when I was a kid. While it was a great place, going there was basically the only thing we ever did for vacation time, we never went anywhere else. And, a fair amount of each visit was devoted to maintaining the place - everything from mowing the yard to putting a new roof on the cabin when the old one wore out. Another thing to consider, looking ahead into the future...when my parents got old, my brothers and I briefly considered buying it from them, but then we realized it would end up that we would be the ones doing all the maintenance and upkeep, while our sister's husbands would only show up to use the boat to go fishing. It wasn't going to be a good long term situation, so we told the folks to just sell the place.
My ex's parents have a 50 acre farm property in PA. They bought the place in 1969 before she was born. Started on a DIY A-Frame house around 1970. The ex was born in late '71 and her brother about a year later. As with you, pretty much every weekend and vacation was spent at the farm building the A-frame. Finally finished 22 years later in 1992. My ex loves the place, but you a can tell there is some residual resentment left over from basically having a minimal weekend social life at home.
If I were to buy a second piece of property, I'd look for something with an existing house (preferably occupied and generally functional) and with enough land to build a large storage barn and RV hook-ups. I'd rent the house and stay in a RV at the barn (glorified man-cave) when I was there. The house rent would be adjusted for them essentially being care-takers of the property when I wasn't there. Of course, finding the right renters would be a challenge.
In reply to mazdeuce - Seth : As a kid I loved going to the lake in the summer. So much so that during the horrors of Vietnam that is what I my mental escape was. I bought on that lake right after my military duty was over. GI nothing down and borrowed $50 from the realtor for earnest money. I still live on that lake.
In reply to stuart in mn :
a second home no matter where is twice as much work as the first home. But Lakeshore, riverfront Oceanside living is in great demand. So much so it appreciates more than twice as fast as other property.
Realize that wealth gained through real estate investment is massively more profitable than other investments.
The downpayment you use controls an asset many times the investment with special tax advantages. With as little as $20,000 down you can control an asset worth 1/2 million. At 3% inflation that’s a $15,000 profit with special tax benefits. Yes you need to make payments, maintained and pay property taxes. But the payments, maintenance and taxes are for the most part fixed while rent will increase without any return.
Unless you cheat or are extremely lucky $20,000 invested in the stock market will not give you a $15,000 return in one year. Historically less than 5% of investors beat the Dow over a 5 year period. Even if you were able to do better than 95% of everybody else income taxes will drag you back down while the investment in real estate will keep appreciating st least at the rate of inflation. Waterfront because of demand will at least double that.
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