Buy and hold on land, or build?

Question

I've been posting a bit lately, and it may seem all over the place, but I'm just trying to explore all our options.

I've posted about buying a long or short term rental down where we want to retire. That is still on the table, but as I explore the area more I feel it has great potential in the future. There is a neighborhood that started to be developed, but I guess when the great recession hit it put some major brakes on it. So roads and utilities are already in place for the lots. That said, I can buy the lots fairly cheap, actually very cheap, even the water front lots are a good deal. When things pick back up in a few years I think it will rise sharply in price.

So lets say I went forward and got a lot for a nice retirement home later on. Would you just hold onto it, and build a home later. Or would you develop it now as a rental (there is a need in this area)?

I guess a better question is does it pay to build a SFR as a rental if you get the land cheap? Or is it still better to find an existing property?

Kevin Reid · Answer

I've been trying to see the costs of building a SFR. Seems to be a wide range.

What hare tha averages you guys are seeing out there for block, stick, and modular homes?

Kevin Reid · Answer

Thank you Carl. I'm 13-18 years away from retirement, because my day job (Firefighter) allows for an earlier exit then most industries. I'm not looking around my area, because of the expense, but more towards SW Florida. I'm looking to buy and hold, eventually get a few, maybe quite a few, rentals for us to help with retirement. The area we like I can get 1/4+/- acre lots for maybe 1/8 the price of Lakeland in decent areas.

I like your idea on development. Building new means you know exactly what you have and how it's built. My biggest worry with purchasing is buying someone else's headache.

Carl Fischer · Answer

Hello @Kevin Reid. You have some very good and interesting questions. Let me first say that I am primarily a buy and hold real estate investor, and when there is a great deal, I'm all over it and buy it. I do buy raw land when it is a great deal, and some of it I develop. Some of it I leave vacant because its very low carrying costs, and I will have it available to build when we go into a recession. Right now, I don't feel like we're in a recession because the cost of the tradespeople and materials are still high, but in 2009-2011, it was easy to find tradespeople at good prices to build the home/commercial property. My answer to you, then: if you can get a great deal on the lots buy it. Make a decision on what the rent would be. In your specific area, it is hard to find affordable housing under $200,000. I have been looking into that area and considering pre-fabbed homes on those lots to sell or rent. And those seem to be affordable compared to a lot of areas in Florida.

As far as getting your retirement home, I am not sure how old you are and how far off retirement is for you, but you can always sell the property you own and buy another one in the same area, or use that house as your retirement home. That is your choice. I am personally a fan of building or developing property, because if you do it correctly, you will have minimal problems in the future. I learned that from my engineering background, and being a buy and hold person, I don't want those problems. Good luck.