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Found 15 acres, loan to buy land, loan to build... how is it done?
Old 11-03-2010, 01:38 PM   #1
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Found 15 acres, loan to buy land, loan to build... how is it done?

I live in a development with an HOA
and recently received another warning about lawn not being mowed and where I park my car (all 4 wheels need to be on pavement, 2 on pavement is not good enough).

I expressed this displeasure to a friend which had 25 acres on a family plot about 2 miles down the road. His brother also has 25 acres "right next door" even though the two houses cannot see each other thru the woods and similar.

His brother is looking to raise cash and sell about 15 of his 25 acres. This is a GREAT opportunity. Can stay in same community, build a house and not bother with an HOA.

I am walking the property on Saturday afternoon. I do not believe the land is for sale (yet) as a realtor I contacted could not find this land on his search.


I have LOTS of questions

1) I assume I need 2 loans- one for the land purchase, then once property is secured (purchased), a second to start building. What are terms or conditions of such loans?

2) Once I have the house built, do I still have two loans, or would a bank "refinance" these to one loan (typically)?

Best guess is land will cost $150k and house will cost another $200k for total value of $350k.

3) I have built a house before, but last time was from a builder, this time I need to hire a contractor to do it... any comments?

4) Never had a house with a septic, or with power lines going through a portion of property. I know to look for easements and road access- any way to figure out this from the county auditor web site?

5) My friend is an "expert" on this land, as his mother inherited it, he had "first pick" of the 4 siblings for what 25 acres he wanted. So I know the 25 acres his brother has is "second best" or worse. But it is still great even if only a small portion of it is usable. Anyone have suggestions for how to price unusable land? Like where the power lines are or similar?
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Old 11-03-2010, 01:41 PM   #2
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Quote:
Originally Posted by jIMOh View Post
I live in a development with an HOA
and recently received another warning about lawn not being mowed and where I park my car (all 4 wheels need to be on pavement, 2 on pavement is not good enough).

I expressed this displeasure to a friend which had 25 acres on a family plot about 2 miles down the road. His brother also has 25 acres "right next door" even though the two houses cannot see each other thru the woods and similar.

His brother is looking to raise cash and sell about 15 of his 25 acres. This is a GREAT opportunity. Can stay in same community, build a house and not bother with an HOA.

I am walking the property on Saturday afternoon. I do not believe the land is for sale (yet) as a realtor I contacted could not find this land on his search.


I have LOTS of questions

1) I assume I need 2 loans- one for the land purchase, then once property is secured (purchased), a second to start building. What are terms or conditions of such loans?

2) Once I have the house built, do I still have two loans, or would a bank "refinance" these to one loan (typically)?

Best guess is land will cost $150k and house will cost another $200k for total value of $350k.

3) I have built a house before, but last time was from a builder, this time I need to hire a contractor to do it... any comments?

4) Never had a house with a septic, or with power lines going through a portion of property. I know to look for easements and road access- any way to figure out this from the county auditor web site?

5) My friend is an "expert" on this land, as his mother inherited it, he had "first pick" of the 4 siblings for what 25 acres he wanted. So I know the 25 acres his brother has is "second best" or worse. But it is still great even if only a small portion of it is usable. Anyone have suggestions for how to price unusable land? Like where the power lines are or similar?
Essentially it is a building lot, so evaluate it accordingly. Any easements ought to be on the deed.

Ha
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Old 11-03-2010, 02:33 PM   #3
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Jim, have you thought about "caring" for a 15 acre property? Is it an area that will need to be mowed, pruned, cleared, drained, planted, etc. etc.? I lived on an acre once and it was way more than I enjoyed taking care of - just me, of course. All land needs at least some care and 15 acres is a lot to care for IMHO. All I'm suggesting is that you go into this with your eyes wide open. If it's something you enjoy doing, you may really be onto something. If spending hours per week clearing brush or mowing grass isn't your cup of tea, you might consider another, smaller property - they are out there, Im sure.
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Old 11-03-2010, 02:49 PM   #4
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Jim, have you thought about "caring" for a 15 acre property? Is it an area that will need to be mowed, pruned, cleared, drained, planted, etc. etc.? I lived on an acre once and it was way more than I enjoyed taking care of - just me, of course. All land needs at least some care and 15 acres is a lot to care for IMHO. All I'm suggesting is that you go into this with your eyes wide open. If it's something you enjoy doing, you may really be onto something. If spending hours per week clearing brush or mowing grass isn't your cup of tea, you might consider another, smaller property - they are out there, Im sure.
Or he could do what a guy in town I know did. Put up a house and leave an acre of grass to mow, and let the rest grow wild. Set the house as far back as you can and live in peace and quiet.........
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Old 11-03-2010, 02:54 PM   #5
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When I purchased some land a few years ago the bank would only issue a short term loan for the land (2-5 years) with 20% down. I ended up re-financing my existing home loan since I had enough equity to cover the cost of the land. You will likely need a construction loan when you start to build. Once the house is built and the certificate of occupancy is signed you will covert the construction loan to a permanent loan. Check with your bank but I believe they might be able to combine the construction and land loan into a permanent loan once the build is complete.
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Old 11-03-2010, 03:08 PM   #6
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Originally Posted by jIMOh View Post
I live in a development with an HOA
and recently received another warning about lawn not being mowed and where I park my car (all 4 wheels need to be on pavement, 2 on pavement is not good enough).

I expressed this displeasure to a friend which had 25 acres on a family plot about 2 miles down the road. His brother also has 25 acres "right next door" even though the two houses cannot see each other thru the woods and similar.

His brother is looking to raise cash and sell about 15 of his 25 acres. This is a GREAT opportunity. Can stay in same community, build a house and not bother with an HOA.
Hire a lawn care service and widen your parking area - much easier than building and maintaining 15 acres.
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Old 11-03-2010, 03:13 PM   #7
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I'm finishing up our vacation house in Maine. We did everything for cash so I have nothing to contribute to finance q's.

Material costs are down and contractors and masons are more available these days. Utility lines are handled either by the phone company or the power company. I think there are six poles from the road to the house. I chose the power company. The cost was about $1.8k...I've been told by folks out of state that that was a very good price. I got what I think was a good deal on the septic and well (perhaps also because of the economy). Prices in rural Maine are relatively low but $4.7k for a two bedroom septic (plus .3k for septic design) $3.7k for the well (180ft) that included the tank, the pump and a trench from the well casing to the house. Electric service underground from the last pole to the house was about $1.5k, that included the pole connection, the trench, the conduit, meter and 100amp service panel. There was an existing rudimentary driveway to the original house/shack. I had what they call bank run (gravel) trucked in to fill in the holes. It's good enough for now.

Our neighbor (local beef farmer) is harvesting the hay fields. My sense from your comments is that this is a wooded lot. If so, just keep it that way.

Being your own general contractor is allot of work ..less so obviously if you're careful with hiring the right help though. Good luck and make it fun.
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Old 11-03-2010, 03:14 PM   #8
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Zoning?

Taxes? Taxes if rezoned after your house is built?

Does the ground there normally support septic systems without unreasonable installation costs?

What is the cost of a well in that area?

Is there a good building site on the 15 acres?

Do you like long, difficult projects filled with expensive surprises?
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Old 11-03-2010, 03:30 PM   #9
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The chance to build on 15 acres makes me very envious. There's no way a person of ordinary means could afford such a thing in Hawaii. I have only 1/4 acre, and feel lucky to have even that much. I hope you can make it work out.
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Old 11-03-2010, 03:58 PM   #10
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You don't have to deal with a HOA. Perhaps that's good. However your potential new neighbors also don't have to deal with HOAs, and that's perhaps not so good. Look at REWahoo, whose ugly neighbor is building a gravel-crushing plant in REW's back yard.

There's a reason this land is for sale, and it's not because of the seller's benevolent goodwill toward all mankind. If he really needed the cash he could've raised it a while ago when land values went nuts. But maybe he was fine before the 2008 recession, or maybe there's some other reason he couldn't sell for a good price-- zoning restrictions? Hazmat on the property? Aquifer contamination from farming or industrial activity? Any underground tanks or decrepit asbestos-filled buildings on the property?

City water or well water? How deep would the well need to be? Has the land passed a percolation test for a septic field? What happens if the local city/county decide to annex the area for sewer/water utilities and assess each property owner to pay their share to connect to the public utility systems?

Hopefully your title is clean and clear of Native American litigation, and the land has no archeological or tribal remains issues.

My grandfather & father were raised in your neighborhood. When Gramps sold the farm in the 1980s it took very little time for the land to be subdivided and made into tract housing. But IIRC you didn't have to drive very far to find a high-water mark from the 1936 floods. You'd also want to know what flood zone you're in and whether you can get homeowner's insurance.

If you look around at the people involved in this land deal, and you can't figure out who's the sucker getting taken to the cleaners, then it's probably you...

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The chance to build on 15 acres makes me very envious.
There's plenty of vacant land out in Kalapana Gardens on the Big Island, and more being made every day!
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Old 11-03-2010, 04:04 PM   #11
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There's plenty of vacant land out in Kalapana Gardens on the Big Island, and more being made every day!
and you probably don't have to mow.
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Old 11-03-2010, 07:32 PM   #12
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When I purchased some land a few years ago the bank would only issue a short term loan for the land (2-5 years) with 20% down. I ended up re-financing my existing home loan since I had enough equity to cover the cost of the land. You will likely need a construction loan when you start to build. Once the house is built and the certificate of occupancy is signed you will covert the construction loan to a permanent loan. Check with your bank but I believe they might be able to combine the construction and land loan into a permanent loan once the build is complete.
This more or less matches my experience 10 years ago when we tore down our small house and built a bigger one on the same lot. We continued to pay on our original mortgage during construction, which would be the equivalent of a loan on the land only.

The construction loan was sort of a credit account for building expenses with a guaranteed conversion to a 30-year mortgage at the end of construction. When executed, the new mortgage proceeds paid off the old mortgage and the credit account that had been used to pay the builder.

What I don't remember clearly is whether the bank's cost of money during construction (for progress payments to the builder) was rolled into the final mortgage amount or paid by us as escalating interest-only payments while we waited for the builder to finish.
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Old 11-03-2010, 07:34 PM   #13
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I don't have much experience in this area, but it occurs to me that looking at the land records and finding/hiring a builder to walk the property with you (before you make any offers) would be a good idea. The property might look different from a builder's perspective, esp wrt siting the house.
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Old 11-03-2010, 08:44 PM   #14
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I have LOTS of questions


4) Never had a house with a septic, or with power lines going through a portion of property. I know to look for easements and road access- any way to figure out this from the county auditor web site?

5) My friend is an "expert" on this land, as his mother inherited it, he had "first pick" of the 4 siblings for what 25 acres he wanted. So I know the 25 acres his brother has is "second best" or worse. But it is still great even if only a small portion of it is usable. Anyone have suggestions for how to price unusable land? Like where the power lines are or similar?

My DW and I built most of our house we have here on 55 acres and tried to do as much on our own as we could. I rented a bulldozer to do the driveway and borrowed a backhoe to dig the septic, outside water lines to the well and trench for power (1,200 ft, also in 4" conduit so they could pull the cable thru it) and phone to save money. I added an extra septic field line in case we wanted an extra bedroom in the future. My county gave me the details and instructions for what to do for the septic system. I also did the perc test for the septic system, that was the first thing we had to do before getting the permit. Then we got the well dug.

I hired the foundation, slab, framing for outside walls and roof. I did the electrical and painting. I wanted to do the inside walls since I made it super-insulated, R50 walls and R70 ceilings. I really keeps the heating and cooling bills down, important for ER.

It took me 2 years and was a lot of work but save and lot of $$.

The power company needed a right-of-way for the underground power line. Just some simple paper work. It's in the deed now, and should be at your court house or online as with our state. We can search on the property owners name.

Sometimes you need a put up some money (a bond) for the driveway interface with the road (can't think of the term they use). They want to make sure it's done right. Depends on the county.

Lots of details to think about!

Good luck.

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Old 11-04-2010, 09:37 AM   #15
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Thank you for the thoughtful replies. I do not want to spam the thread with lots of replies. Here is a brief summary of my replies

1) I have seen the property numerous times from my friend's property. His brother's parcel is right next to his. I am walking it on Saturday.

2) The land is highly wooded, I won't have to mow much lawn, and would enjoy riding a mower and having a 6 pack while mowing. That won't be a problem as long as I decide when it mows.

3) Much of my questions are along lines of septic, well water (I hear of a technique to capture rain water from roof) and whether there is a gas line that far away from civilization, or if it is electric heat.

4) What I know now is that of the 15 acres, about 3 of it is "unusable" for sure (power lines run right thru property), but it is not clear how much that lowers the value of the other 12 acres.

Quote:
Any underground tanks or decrepit asbestos-filled buildings on the property?
I know who used land for at least the last 75 years

This land has "never" been used. It was part of a family plot which goes back 3 generations from my friend's mother and her lineage. Her 100+ acres has been split among the 4 kids (each kid has about 25 acres) and my friend's brother is looking to liquidate 15 of his 25.
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Old 11-04-2010, 01:49 PM   #16
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Wells, septic and propane tanks (as opposed to natural gas lines), are all very common...you don't need to fear (or invent) any of them.

Depending on your soil and house size (in Mass it is based on # of bedrooms), a system can be cheap, or very expensive - best to find out ahead of time...you literally can spend $4,000 or $40,000 - all depends on the soil quality, rocks, house size and local board of health rules.

But assuming you can afford it, if it is designed well, and cared for, a septic system should last 20-30 years - maybe longer. You pay up front, but then don't need to pay sewer bills for 30 years either....

I have a well and have for over over 25 years, grew up on 'city' water coming in a pipe, but nothing beats the taste of 'poland spring' quality drinking water coming out of your tap for free - another instance of paying upfront for a well ($1,500 to $5,000 or more depending on how deep they have to go). but after that no water bills and very little maintenance.

If natural gas lines aren't out by your property you can buy (or rent) a propane tank - they are available for cheap from the propane suppliers; for all intents-and-purposes, propane and natural gas are interchangeable most gas appliances will run on either just by changing a small part (everything I have bought came with parts for both, and you just set it up for the gas you will be using).

With a 15 acre wood lot, you can probably get yourself a woodstove or wood boiler, and save some dough on your heating bill too if you desire. I've dropped my oil usual from 2,000 gallons per year, to about 100 buy harvesting wood off of my property. That saves me about $5,000 a year in heating costs.

From an ER perspective, it can be a lot of work to have a country home, but you can also save a lot of monthly expenses by living off your property - if you are willing to trade your time for some savings.
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Old 11-04-2010, 03:42 PM   #17
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I know who used land for at least the last 75 years
This land has "never" been used. It was part of a family plot which goes back 3 generations from my friend's mother and her lineage. Her 100+ acres has been split among the 4 kids (each kid has about 25 acres) and my friend's brother is looking to liquidate 15 of his 25.
So you're willing to take on faith that nobody's sneaked nothin' onto or into that land for the last 75 years, even if you could spend a few hundred dollars to have it checked by a soils/hazmat engineer?

Knowing what my grandfather used to put in his "trash ditch" back in the 1960s, you'd better hope that none of his neighbors emulated his disposal tactics. You might benefit from poking into whatever nooks & crannies on that property are handy for dumping grounds, and from seeking professional help before it's too late.

As for water catchment instead of city or well water, you have a lot of research to do there too.

I wish you luck with your real estate endeavors.
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Old 11-05-2010, 01:18 PM   #18
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I will be curious if you can get both a loan for the land AND to build a house. My wife and I have owned outright a 5 acre lot for about 5 years and this last summer we were going to build a house on it. Being an Architect I saved those costs, but there are lots of upfront costs that pretty much nixed the deal.

Land costs were very expensive. To get electrical to where the house was located was going to be a pretty significant cost. We also had to access the property through a county easement that was about 300 feet long. So a new gravel road would have to be built by us to get to our property, the water, cable, electrical would have to be laid along this road to get back to the property. Those were all pretty signficant costs.

The septic was good as we have good soil. Unfortunately in order to even submit for a building permit you have to have an approved septic design. And in order to get an approved septic design you have to get a survey, then get a water availablity letter from the county...all told that was about $7k with $5k of it being that letter! All of this before you can even submit for a building permit.

When we talked to the bank I thought it would be easy but it wasn't. A few years ago there wouldn't have been any issue according to the banker but now unless you have owned the property for two years or more they want even talk a construction loan (unless you are a builder). They want 25% down on the construction loan and our land value only came in at 20% of the loan we wanted so we would have had to put up another 5% to even get the loan (or reduce the house costs).

End result we ended up NOT building the home. Actually found a nice home on 2 1/2 acres that had almost everything we wanted in the house I had designed! And at 2/3 the cost. We had some remodel work done on it before we moved in and used the same GC we were going to us on the new house and afterwards he told me he thinks I did the right thing. He said that the house I did buy--he couldn't build it today for what I bought it for. Construction costs have come down some, but they have not aligned with residential property values. So the smarter move today would be to buy a house that is for sale and remodel it rather then build new.

Good luck either way! I know it is very exciting to think about building a house and all and I don't want to rain on your parade. Just be cautious and make sure you get a good contractor. Feel free to email me if you have questons along the way.
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