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Big Purchase + low risk taker = high anxiety
Old 03-21-2017, 07:10 AM   #1
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Big Purchase + low risk taker = high anxiety

First some background...

DW and I are mid to late 40's and have been planning for FIRE by age 55 (lately it feels like 53 is a better plan). I'd like to say we've lived pretty modestly over the years to be able to put away lots of money for retirement. The home we currently own is below our means with a current value of around $375,000. Yet, with one DS in college and another about one year away from college, we've been talking more about housing in retirement. We certainly won't need a 2,600 sq ft home with just two of us. It’s just more maintenance and cleaning. Yet, we like where we live and there's really no rush to move... our target for selling was as close to retirement as possible. And when we do move, our thought was that it would likely be lateral in cost or maybe even a slight step up even though the space would be smaller. This is because we were hoping to find a location with a bit more land (and privacy) and a few additional amenities (like a 3 season porch). currently, we’re on 1/2 an acre with close neighbors and not enough trees. The subdivision was developed from a farm field. We’ve planted many trees but there’s only so much you can do when you’re starting with nothing.

There's a community about 30 minutes from us that we really like and we've thought a lot about how it would be a good fit for us in retirement if we could find the right spot. It's a small community with a really nice downtown, filled with restaurants and shops, etc. It's pedestrian-friendly with great bike and running paths, and minutes off the freeway if we need a bigger city, which is only 20 minutes away. The problem has been there's very little available close to downtown that has more than 1/4 acre. Once you get further out, the only land to be had is farmland that's being developed and we don’t want the same thing we currently have. No trees, no character and too far from the downtown area. Also, if you find something in the ballpark, there's a house that's way too big (and/or pricey). So with only one eye open, we kind of put the idea on hold unless something falls in our lap.

So fast forward to a couple days ago when DW is poking around on her laptop looking at new listings in the area we like and she stumbles across a lot that was just made available just 24 hours before. Was that the sound of something falling into my lap It’s a 2.6 acre wooded lot that backs up to the creek that runs through town and it appears to have the close proximity to town that we were looking for. We decided to jump in the car and go check it out. As we pull up, we see the realtor talking to a couple people and exchanging contact information. We knew already based on location that this lot wasn’t going to last long… hours or days, certainly not weeks or months.

The realtor gave us the background on the owner/history and gave us a tour. The owner lives in the house next door and their family has owned the lot for many years. They are looking to build somewhere else and have no reason to keep the adjacent parcel anymore and will eventually sell the adjacent property also once their new home is built. The listed lot doesn’t have water and electric yet but there’s already a perfect clearing for a house. Also, there are no home owner association rules and very flexible ordinances in the township so we could build our smaller house. Oh, there’s also a shed and a one car garage that would come with the lot. They’re small but in great condition. The listed price is $199,000, which is not too far off for cost per acre in the area and perhaps on the low side given the demand for this location and type of property. So suddenly it all becomes pretty real.

We decide that to beat the rush we’d put a cash offer in immediately and figure the rest out later. We figure it’s reasonable to think that most people would have a financing contingency so a cash offer should help secure the purchase. Yikes! Neither of us are spontaneous people so this is waaaaay out of our comfort zone. But we knew that this is what we’ve been looking for and we’d really regret it if we passed it up. So, really long story short, we made an offer, seller countered, we own it at $196,000. As it turns out there were already 2 other offers on the table.

So here we are trying to figure out what to do next. First things first… we want to find financing! Yes, it’s not in the offer but it we don’t have to part with our money and can find cheap financing we’d rather do that. We have about 35 days to close so there should be time to throw this together. From the couple of calls I’ve made it looks like we can secure an 80% loan with a 5/1 ARM and a 20-year amortization at under 4%. Not bad for a lot loan! And we love the idea of having a fixed rate for 5 years considering the current rate environment.

The long term plan is still the same… stay in our current home for maybe 5 more years. That should give us some time to aggressively pay down the lot loan and figure out what we want to build and who we want to build with. Ideally, we’ll have most of the $160,000 loan paid off when we’re ready to build. Then we can help secure construction financing using the land equity. I still don’t have a sense as to what a new home will cost but without any significant restrictions we can be flexible on cost. And we have lots of time to figure it all out. In 5 years, we should also have the mortgage on our current home paid down to about $75,000 leaving us with $300,000 of equity when we sell. So if the new build costs, say, $250,000 we should be debt-free for retirement even if we have a small balance left on the lot loan. I think that all works.

The initial shock has worn off but we still have quite a bit of anxiety about the whole thing. It kind of upsets my stomach to be even writing about this. But I think it’s all good, and maybe this is good therapy. Can anyone tell me everything will be okay? Please??
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Old 03-21-2017, 07:22 AM   #2
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Everything will (probably) be OK.

I've done similar things before, and while it can be anxiety producing, it always seems to work out. After you settle down and can think, you'll realize that all the searching and thinking you did before this happened was preparation to let you recognize the right thing when it came along. So this wasn't an impulse, it was the result of long term research and education. Ever hear the old saw about luck being the result of hard work and preparation? Well, you just got lucky.
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Old 03-21-2017, 07:22 AM   #3
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Some of our decisions that resembled the one facing you, have not turned out as well as we'd like, but it wasn't because of anything we did or failed to do. It was just that circumstances changed in ways that nobody could have anticipated (or could have, but it would have seemed very pessimistic to expect). Everyone faces that with every decision.

One thing to keep in mind is that, not being spontaneous people, you have actually done a lot of the advance thinking that truly spontaneous people do "on the spot and in the moment." Plus, you have been living with yourselves and your likes, dislikes, and suspicions for almost 50 years each - that's a lot of years of built-up experience and intuition. So you are left with, "how much do we usually trust our intuition?" And, "If we lose out on this chance, how likely is it that another one will come along?

For me, with your description, the first thing that popped into my mind was, "How much will well, septic, electricity cost to install?" I would absolutely have to have some idea. If I had to research those costs, and in the meantime I lost the lot, that would be OK.

Good luck!
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Old 03-21-2017, 07:23 AM   #4
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Sounds like you are making a bold, opportunistic move that, while somewhat spontaneous, is still well thought out. Just make sure that the seller understands that there is a difference between your desire to finance and that the sale is not contingent on financing... IOW, if push come to shove that you are prepared to pay cash.
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Old 03-21-2017, 07:24 AM   #5
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Good for you! Congratulations! You knew what you wanted, found what you wanted, and made the decision. Too many people suffer from analysis paralysis. When you know the market and the right deal comes along you take it. All will be well.

An example: in 2010 my gal was 1000 miles away taking care of her Mom. On our evening talk she said she had seen a great place on Auction.com and had done a drive by. I had noted the same place. Got a $5000 cashier's check, got in the car, and drove south. We did a quick walk-through, won the auction, and spent the drive north dealing with the particulars of the sale.

You are right - makes the stomach churn - but it's kinda exciting too, right? This land will let you build at your own pace and be set with a new home at your retirement - Good on you!
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Old 03-21-2017, 07:25 AM   #6
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Based on your description, it is hard to see how this could go completely upside down. Real estate, especially in that sort of location, rarely goes to zero - short of discovering a toxic waste dump on top it), so as long as you have the reserves to carry the mortgage for a while, you'll be ok.
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Old 03-21-2017, 07:29 AM   #7
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Sounds exciting to me and you will have a lot of time to plan out the perfect retirement home on what sounds like a great lot. My in-laws just built a beautiful retirement home on an amazing private forested lot and are going to sell their other home in the next year when father-in-law retires. It was a time consuming and often stressful experience for two people who don't do well making decisions but the end result is even better than any of us hoped for. Good luck with your planning!
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Old 03-21-2017, 07:31 AM   #8
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Is a well and/or septic system required? Both require ground testing and depending on the conditions can add substantially to the cost. Find out what the property taxes will be for the empty lot and budget accordingly. The increasing taxes were one of the main reasons I decided to sell a lot I owned.
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Old 03-21-2017, 07:34 AM   #9
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A lot like that actually sounds a lot less risky than a house; despite an inspection house purchasing is little more (IMO) than a crap shoot! I have had high anxiety buying and selling houses, although my last purchase (where I now hope to live forever) was a marvelous one.
I've always wanted to buy land--and now you can dream of all the possibilities! If for whatever reason you decide not to build it seems like you could sell it easily for a profit. Win-win.
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Old 03-21-2017, 07:37 AM   #10
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Don't worry. The deal will work out great for you.

I long ago realized that when interest rates go down, you go for fixed rate financing. In times of high interest rates (like 1981), adjustable rates were more attractive.

Real estate is still a great place to put your money if it's in a highly desirible, marketable area. Obviously this meets the criteria.
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Old 03-21-2017, 08:52 AM   #11
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Everything will (probably) be OK.

After you settle down and can think, you'll realize that all the searching and thinking you did before this happened was preparation to let you recognize the right thing when it came along. So this wasn't an impulse, it was the result of long term research and education.
+1.

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Is a well and/or septic system required? Both require ground testing and depending on the conditions can add substantially to the cost. Find out what the property taxes will be for the empty lot and budget accordingly. The increasing taxes were one of the main reasons I decided to sell a lot I owned.
DW and I did something similar a few years ago. We found an area in a neighboring state that we really liked, and wanted to buy some acreage to build on in RE 10+ years later. It wasn't a rush; we hunted for a while and did buy some land that was the best choice we could find, following a septic test. After that it was fun to consider what we would want to build there. Jumping ahead 7 years, our situation had changed somewhat and we no longer felt that the area around that land, which was still nice in a lot of ways, was really the right place to locate permanently in RE for other reasons. At that point we just put the land up for sale and after a while it did sell.

My point is that it is OK to act on your needs as things come along, but that does not necessarily trap you into something if you change your mind. Good luck.
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Old 03-21-2017, 08:59 AM   #12
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If there were two other offers on the table, you should have no trouble selling the lot if your situation changes. I can't see how this purchase is a bad thing.

It may take you five years to work through all the planning before you can break ground anyway.
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Old 03-21-2017, 09:04 AM   #13
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Life is an adventure. Think of how upset you might feel, if you had just let this opportunity pass by without acting on it and making an offer.

Sure, there is a lot of stress to be had, but it's part of the experience.

Congratulations on finding this property! Finding just the right one is difficult sometimes.
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Old 03-21-2017, 09:12 AM   #14
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If there were two other offers on the table, you should have no trouble selling the lot if your situation changes. I can't see how this purchase is a bad thing.

It may take you five years to work through all the planning before you can break ground anyway.
+1. If you get too big of a stomach ache from all the spontaneity of the purchase, just flip it. Or go all out and ask the owners if they will sell their house to you too.
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Old 03-21-2017, 11:41 AM   #15
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So with only one eye open, we kind of put the idea on hold unless something falls in our lap.
Sounds almost perfect. You know your desires, waited patiently, and found what seems to be just what you've been looking for. Only caveats I see is making sure you know how sewer/water will be taken care of (and how much it will cost), whether there is a good building site, and going through the whole home building project. The latter can be fun and you can get what you want, but it can be very stressful and more expensive too.

Is everything else around the land developed? No chance you could have a strip mall or anything like that on the border of your property?
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Old 03-21-2017, 03:21 PM   #16
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Your golden years should involve less anxiety. I hope your new project works out for you. As others have pointed out, the worst case is that you sell the land in a few years, hopefully for a decent profit.

Have you ever contracted to build a house before? If not (or perhaps even if you have), I'd be researching how to manage the project. For example, I did a search on amazon and came up with:

How to Plan, Contract, and Build Your Own Home

I've heard some horror stories on custom builds gone awry, which is why I'd be cautious. Good luck!
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Old 03-21-2017, 03:45 PM   #17
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Thank you all for the reassurances. As the hours pass, I feel less and less anxiety and your encouragement really helps.

A number of you had very good points regarding the limited downside. I guess that helped push us over the edge. Worst case scenario we could just sell the lot but I can't imagine it'll come to that.

The potential cost of the electric and the well and septic which a few of you brought up are a bit of a concern but I managed to ignore my better judgment on that one. I decided (maybe wrongly) that the electric should be easy because we're in an existing subdivision (very established subdivision) and there are houses on either side. (see the attached picture). The well and septic is a complete mystery to me but again, how bad could it be if others there had to do the same? Does that make any sense? Has anyone else had to go through the well and septic process? We've always had city water and sewer.

Thanks again for all the encouragement and great tips!
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Old 03-21-2017, 03:48 PM   #18
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Has anyone else had to go through the well and septic process?
Yes, been there and done that - as have millions of other people. All it takes is time and money.
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Old 03-21-2017, 04:00 PM   #19
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(I know nothing about wells or septic)

I just wanted to add that what you are going through, is nearly identical to what happened to me on May 1st, 2015, when my Dream Home just fell into my lap in much the same way. My impulsive house purchase turned out to be the best decision ever.

I am so excited for you, and hope everything goes smoothly.
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Old 03-21-2017, 04:01 PM   #20
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Originally Posted by pb4uski View Post
Sounds like you are making a bold, opportunistic move that, while somewhat spontaneous, is still well thought out. Just make sure that the seller understands that there is a difference between your desire to finance and that the sale is not contingent on financing... IOW, if push come to shove that you are prepared to pay cash.
Yep, the seller knows we're all in either way. We wouldn't like it but we could come up with the money if we had too.

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Find out what the property taxes will be for the empty lot and budget accordingly. The increasing taxes were one of the main reasons I decided to sell a lot I owned.
Taxes in this area are very reasonable. Even after we build they should be less than our current home.


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Is everything else around the land developed? No chance you could have a strip mall or anything like that on the border of your property?
See the attached picture. I think we're in great shape there!

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Originally Posted by socca View Post
Have you ever contracted to build a house before? If not (or perhaps even if you have), I'd be researching how to manage the project. For example, I did a search on amazon and came up with:
URL="https://www.amazon.com/Plan-Contract-Build-Your-Fifth/dp/0071603301/"]How to Plan, Contract, and Build Your Own Home[/URL]
I've heard some horror stories on custom builds gone awry, which is why I'd be cautious. Good luck!
Yes, we learned a lot from building our current home... big difference is that the lot was in a city and was already improved for the last one. But we'll have a lot more time to prepare on this project.

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Yes, been there and done that - as have millions of other people. All it takes is time and money.
Ha ha! So cruel.
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