Buying Vacant Lots instead of Vacant Homes

7 Replies

I have an opportunity to buy vacant lots for 2 - 3k. Two are on a street i have a property and empty lot already on the street. The house and lots are in a low income part of a city. It is in an area where there are homes that either are in foreclosure or vacant rentals. Not a lot of qualified tenants, and not worth the carrying cost of a house that can be broken into and vandalized.

I could over time purchase the whole street, and work with the city to annex the lots into the city, currently in the county, but borders the city limits. Sit on them and work to redevelop the area down the road.

The property tax on the lots is like $200 / year, and couple hundred dollars a year per property to cut the lawns.

Do i acquire them?

Thanks

@Jaren Barnes Funny, Jaren!

Hi @James Geraci

James, I am not expert at all in vacant lots, only a little bit more in seeing potential in low income neighborhoods.I can see a few things about this situation, but I leave the door open for anyone more knowledgeable in this to chime in, and for you to gladly take their advice!

My first instinct is to come up with a strategy that does not involve the city. Why get the city involve, when usually county seats are a lot less intrusive, have lower taxes, and less regulations on how you manage your land? And, even if you wanted the city to include it to get a part of the funds that can open up, you're leaving yourself open to being a pawn of a political system...If you trust in their good sense (and there are some cities that do have some sense left), you may be able to work out a deal and get some funds, but I don't like putting that much of my financial future in the hands of bureaucrats...at all.

However, if you're not going to wait on the city to annex them with city funds (which is in no way guaranteed to get a council member to listen to you...possible, but not guaranteed), Do you have some other ideas? Maybe putting a manufactured unit on the land for about 35-40k, maybe, if rents support a positive cash flow? Especially if its a state very familiar with a large portion of its residence living in manufactured homes, the rents that are possible won't dip that much because its not stick built.


Those are my ideas (again, not my forte), but I just wanted to throw out how I would be thinking about things. What do you think?

Hi @Lisa Phillips

Thanks for your reply. The city allows properties to be annex into, you pay a fee and then it goes up for review by the planning committee, so there is a bit of risk there.

Unfortunately properties in this area are going for dirt cheap a lot under 40k, but the number of qualified tenants and buyers is very low, and the amount of properties for rent definitely exceeds 4x from tenants.

I agree with your thoughts about the city, I would like to keep them in the county, the street also bumps up to zone-1 area, salvage yard, manufacturing, etc. (Sell the street to them in the future)..

The properties on this street require well & septic. The street runs perpendicular and connects to a street to the north and south. So the street could be removed, since the county doesn't really maintain it.. maybe.

There are other streets that parallel this street to still connect the north and south streets.

I am thinking if over time i could just buy up the street, that i could resell or redevelop in the future. I know it is speculation.

Thanks,

Jim

Yes, it is speculation, a bet, this sounds like a bad bet at this time.

Any town or city that have the powers of annexation does so for two primary reasons, one is growth. The master plan needs to be looked at, what alternatives are there for growth, why would the go in that direction? This aspect could be another book, but in a paragraph, there it is.

Next is tax base. Annexation provides an increase for the tax base but it's not totally free. When a city acquires an area they also inherit all of the maintenance of infrastructure, road, water, sewer, sidewalks, lights and storm drainage. These aspects must meet standards before they will take an area, generally. That costs money. Not only that, they now have a responsibility to provide fire and police protection, in this area that could mean the police presence goes up, manpower hours increase answering calls and assets set aside for such services.

Now, you have cheaper properties, undesirable that don't contribute to a tax base and could well be that they will have more in expenses as well as liabilities exceeding the taxes received. Why would they do that? They won't.

They may agree to if the tax base and growth pattern fit under the master plan. If you go in and rebuild, bring property values up that will support a higher tax base, then they may be agreeable.

If you approach them owning all the properties with plans for the entire area, then you're in a position to develop, have the area identified as blighted, seek economic development financing, even federal funds if there are more than 12 units and you're well connected politically. Perhaps it would provide other benefits, such as jobs, corridors to other areas for higher development that tax incentives might be available.

Unless there are benefits to the town beyond cleaning the yards and painting old houses the won't be interested. Beginning speculators have much more to learn than just real estate, they need to be able to justify their ideas through government and social needs.

That said, my dad passed on buying a farm outside of town along the highway 45 years ago, the mall sits there now and it's the higher end shopping area of the city. If you're willing to sit on it long term paying the carrying costs without any guarantee, you could do very well. Probably not the case on this possibility, I'm not responsible for you decision as I won't be around in another 45 years! :)

thanks bill!

I can only speak for my tiny local area, but vacant lots here go for dirt cheap (sorry!), if they sell at all. You can buy empty lots in town for $3,000 - $4,000 & probably even less. One of the problems here, which may be similar in other places, is that new construction has to conform to newer setback regulations & the lots just aren't big enough. So after tear-down, you can't build anything new on it - kind of a Catch-22. You might check that situation out, since it could make the whole thing into a white elephant.

Originally posted by @Kathleen Leary :
I can only speak for my tiny local area, but vacant lots here go for dirt cheap (sorry!), if they sell at all. You can buy empty lots in town for $3,000 - $4,000 & probably even less. One of the problems here, which may be similar in other places, is that new construction has to conform to newer setback regulations & the lots just aren't big enough. So after tear-down, you can't build anything new on it - kind of a Catch-22. You might check that situation out, since it could make the whole thing into a white elephant.

Sometimes you can get a variance on set backs. Also some cities have a small lot amnesty program that allows building despite the lot not meeting normal requirements.

I'd only buy vacant lots if a substantial profit could be made after building. Not many areas support this. And there are some places where free is too much to pay for a vacant lot.

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