Buying land in the Bay Area. What's the catch?

Question

I currently live in the SF Bay area, and am renting as I cannot afford a $1.5m+ house. As both rents and mortgages are astronomically expensive, I'm looking at alternatives.

One is buying land. In the peninsula, there are many plots of land available for several $100k, or even less. In particular, there is a lot of land around boulder creek/ Scotts valley for very cheap. It might be a bit more of a rural lifestyle, and add an extra 10mins to my commute, but that's more than worth the savings, to me.

Assuming that I do my DD and the lot is indeed buildable, I'm wondering what's the catch?

Dan Sundberg · Answer

Depends what you mean by "catch". Basically, there are a lot of rules around what you can do with the land, especially in the bay. If you are looking to build a dream home or custom home, then land can be a great bet, but for a cost saving measure...typically not. For an individual, building a 1-off home, the costs typically wind up being pretty close to market value for a regular single family in that area. So in your example, if a 1,500 sq ft. house is selling for $1.5M in the peninsula. It wouldn't be surprising that construction costs are going to be somewhere around $400 - $700/sq ft, converting from raw land, to build a similar 1,500 sq ft house, plus the cost of the land.

There may be options for alternative housing, like modular homes, or tiny homes, or something like that, so could be a good opportunity. But also due diligence on local rules for what you can/can't build will be critical.

Jay Hinrichs · Answer

I suspect most of those lots are either not legal to build on or have such tough conditions not feasably possible.

As for Santa Cruz Boulder creek..

Well thats where my Dad started in real estate in 1965.. there are thousands of lots that were platted there in the 20s and never developed they are legal lots of record so they do trade.. Usually with the companies that buy tax sale stuff and sell it to others who dont know they are not buildable.. by Loch Lomond Lake there is a big swath of them.. Brings back memories for me.. we used to hang out at the Trout farm in while my dad was working.. It was OK in those days to sell these lots that just had a basic dirt road pushed into them.. NOW the real value is the Red wood on them if and thats a big if you could log it.. The trees are worth far more than the dirt.

there are antiquated platted lots all around the bay area .. there are some above San Mateo there is a nice chunk of them above Brisbane and Above the little town of Crocket .. that used to be my specialty finding the gems.

You can buy lots in Richmond that are buildable I bought one for under 50k it was flat and buildable.

Good Luck with it..

Sharon Wu · Answer

The catch is usually that buyer "assuming" it's buildable, but after the DD find out it's not or it requires a lot of work to make it buildable. However, if you know what you are doing, the development process could be quite profitable.

Rick Trivedi · Answer

@Tyler D.If you see the lots which are cheaper compared to the rest of the area, you need to look out for the following

1. Whats the allowed zoning? Is the lot buildable? Extreme slopes will make construction cost too high.

2. Utilities - Water/sewer/electric access?

3. Land surveys and other studies - Geotech report, soil report, fault lines, environmental report etc.

Most of the lots would not survive these due diligence items. You can consider the ones that do but then the price would be market price.

Buying land in the Bay Area. What's the catch?

Buying land in the Bay Area. What's the catch?

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