Considering property purchase

6 Replies

Looking to relocate in 2-3 years from large downtown city into a more rural area where I can have some land and build a house. I found a perfect (for me) plot of land. It has rolling hills, grasslands and a stream. It's 23 acres and by no means do I need that much. The asking price for this undeveloped parcel of land is $325k. I would have to finance 80% of the purchase of the land. If I were to just hack off a 8 acre parcel of this and buy it, the owner will be developing it in a few years as part of a second phase of developments he's doing a cross the ravine. Initially, I thought buying a small part of this parcel is all I would need, but then I got to thinking :idea: . Perhaps it would make sense for me to buy the entire lot and here's my thinking why;

1-I could buy now and sit on it for about 3 years until I'm ready to make the move out there. This would ensure no further development/crowding out this quite and serine property
2-In 3 years I could keep 8-10 acres for myself and parcel the remaining 13-15 acres into two lots and sell them. I might be able to make a bit of a profit on this, maybe not. I could use the cash sale of these two parcels to financing the majority of the price to build the eventual house that will go on this land
3-This would allow me to control how many neighbors I'll have (I don't want a neighborhood with houses spaced 15 feet apart going up)

So, maybe a bit of an investment, I don't really think sitting it for 3 years would let it appreciate much in value, but, it would give me control and future sale of any of the remaining property would be put towards building of the new house. Just a big money shuffle, perhaps. Things to consider would be township property taxes and liability.

Does anyone have experience with this type of thing? It's in a part of the midwest that is growing and the city that it is nearest (about 10 miles west) is expanding east towards this area. It's great for families and is surrounded by great school districts.

The usual risks are associated with this, I'd say real estate in the area is fairly hot right now, so I could possibly be purchasing at a premium compared to what it might fetch in 3 years if there is a market down turn in the area.

My current financial situation can support the mortgage and my job situation is fairly stable. My current property I have in the downtown area of the major city I live in should be easily rentable which would, at a minimum, cover mortgage, taxes and HOA fees.

I know what I don't know. I don't know anything about buying land as an investment or to build on. There are a lot potential intricacies with the township zoning and environmental issues with the stream. It's a lot to digest, where do I start?

I'd love to hear your thoughts!

I know in Texas, not sure about elsewhere, you get a substantial discount on the property taxes if its greater than 10 acres. I think the minimum might be 12 acres, but I could be wrong. The reason is that the 10 acres is considered farm land/ undeveloped and the homestead sits on the remaining land. Something to research before purchasing only 8 acres or subdividing into much smaller plots for yourself. You could end up with a higher tax bill on an 8 acre plot than a 15 or 20 acre. Someone else may know more about this than I do.

A friends of mine in Texas told me about all of those exemptions.  It sounds great!  I'm also in the military (as is my friend) and there are incentives for that as well. I'd be curious to hear from a Michigan real estate pro, but, this is what my research leads me to believe;

The only real exemptions would be Primary Residence Exemption, Agricultural exemption or qualified forrest exemption.  

The forrest exemption obligates you to sell 80% of your lumber in a lot 40 acres or less.  I dont want to do that.  I want to keep the trees!

The agriculture exemption is possible, the property is currently used for a lot of maple syrup development, however, if you have a primary residence exemption its the same as the ag exemption and they cannot be combined.

Might be more out there I'm unaware of, would like to hear!

Have you verified the zoning laws that apply to the property by both researching them yourself and by speaking with the zoning authorities involved? Don't just trust the seller. 

 I purchased 5 wooded acres around 2000-2001 in a restricted subdivision outside any city limits in SE Texas. I am about 10 miles from the city/town also. I planned on holding the land and eventually building on it. After a year or two I sold the timber (Pines not Hardwoods), which paid the note for almost a year. After it was cleared of the pine. I found a ravine/wash cut across the front side of the property. This made the largest usable area tough to access. This was just one of many things I ran into in the process of eventually building/developing the property and eventually my home. At the time of the land purchase I thought it was expensive but I was much younger and dumber. The land has doubled in value since I originally purchased it.  You have a lot of factors involved it sounds like but I am not familiar with the area you are thinking of purchasing the land in. I would say buying the whole thing, keeping the best part, and selling the parcel(s) to offset cost is a good idea and I have seen it time and time again here with larger parcels.

I would look at what your ultimate goal is and work from there.  My goal was to eventually live on the land  I bought. I could have sold it if I had to for an exit, but my end goal was to make my home there. Controlling things around you can be important if you plan on living there eventually.  I am not sure how rural the property is but I had to factor in well and septic for my land. There are many things that need to be factored when building in a rural area as opposed to building in town or where you have public water, sewer, gas, internet, phone, etc.  When I built I had no zoning or planning to worry about other than septic.  My taxes probably doubled, but I am on five acres now with a home twice as large as opposed to the home on a small lot I used to have in a cookie cutter neighborhood. 

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