Here goes, there are some relatively cheap parcels of unrestricted acreages within driving distance of where we are residential managers and we have been thinking seriously of buying this unimproved property. But...there also are ocassionally some houses with a little land available in a decent price range.

The question is this. Being short of cash means we have to waite to purchase the land for at least a half year and that is only going to get the down payment and pay closing costs w/owner financing because we are cash poor. Some of the real estate guides I have read give the distinct impression that unimproved land will not usually qualify for a loan, no matter how good your credit is.

We had hoped to start out buying the land and then building as we could afford it.

With a house (fixer upper) already built, it is easier to get the loan, but then we are probably stuck with a home owners association or a bunch of stupid restrictions and a smaller lot.

What has been your experiences?

-- Stephanie Nosacek (pospossum@earthlink.net), July 13, 2001

Answers

Just my way of thinking but I wouldn't by ANYTHING that had land restrictions!!!!!!

-- Suzy in Bama (slgt@yahoo.com), July 13, 2001.

Land with buildings wins hands down, in my opinion. 13 years ago we bought an old house (no windows or doors) that was on the way to being burned by the local fire department. The house was on 9 acres and the price was probably about $500 more than the same amount of vacant land, at the time.

A rough move in was ready in 2 weeks, and it is still home today. If I had waited until I had money, Oh yes I did get a seller financed deal; and then had to build, I have no idea how long it would have taken to get out of town.

If you can get a place to sleep and stay warm, you will be on your way.

-- Ed Copp (OH) (edcopp@yahoo.com), July 13, 2001.

Typically, unimproved land is very difficult to use as collateral for a mortgage loan. If you have absolutely stellar credit, you can do this. Of course, if you have stellar credit (and sufficient income to meet the debt-to-income ratios for payback), you don't need to use the land as security, anyhow. ;o)

As to buying land with a "fixer-upper" house in place, you may face a worse problem. With no house, there are no inspections or minimum standard for a structure to meet in order to qualify for a loan. Lenders don't want to lend money on what something might become if you succeed. They look at collateral as it sits. Even if you intend to bulldoze the house and only want to borrow against the land itself, lenders will typically either want that demolition done at the outset (prior to handing over the check) or want the home to meet standards.

One of the major reasons for this is that the vast majority of residential mortgage loans in this country are sold on the secondary market. There's a good reason for this, too. The bank on the corner doesn't keep it's money tied up for thirty years on one loan. It needs a market wherein they can sell that loan for cash (keeping some profit, of course)so they can lend that money out again.

This secondary market is almost exclusively the domain of the Federal National Mortgage Association (FNMA). Because of that there are standards (known as FNMA underwriting guidelines) which must be met in order for a loan to qualify to be sold in the secondary market. In other words, if those guidelines are not met, the bank may well end up stuck with that thirty year commitment they don't want. Hence, they'll make darn sure everything is up to snuff before they hand over the check.

The bottom line to what I'm telling you here is I believe you'd be better off buying land for cash then getting a construction loan to build what you want. If that's outside the realm of possibility right now, consider looking into a signature loan or even a loan collateralized by something else (free and clear vehicles, for example) to get the money to buy the land. Then, when you get your construction loan, those obligations can be paid off by proceeds from the permanent mortgage loan which will either replace the construction loan or into which the construction loan will be converted.

I know I've dumped a lot of information here for you but I didn't see a way to shortcut through much of it without leaving too many "why's" in your mind. For those "why's" I didn't cover, feel free to email and ask. I'll do my best to answer them for you. I hope this helps.

-- Gary in Indiana (gk6854@aol.com), July 13, 2001.

Thanks a lot for the input. I think, since I really don't like dealing with the banks anyway, that we would be better off paying cash, then building the cabin.

Got to thinking, if you get a place with a house and you are away most of the time working and living somewhere else, it's prime for burglers and freeloaders.

I found a site called www.panelconcepts.com, the kits sound reasonable. OR, we could save up some cash and build our own with a little better insulation and still come out ahead. Build it one piece at a time and it will all be paid off, more or less buy the time we leave here.

-- Stephanie Nosacek (pospossum@earthlink.net), July 13, 2001.

Hi Stephanie, From personal experience...buying the land with fixer upper is by far the way to go. We have done both in the past. The first time was land with every intention of building. By time we had the lot paid for so we could finance the build, life just took over and we never did get that that house on that land.

Next time around we bought the fixer upper to beat all fixer uppers! We had friends that believe there is almost no place that can't be fixed up but when they say our little "fixer upper" they asked "what the heck would possess you to buy this place"?? LOL

Well, when you live in a place you are VERY motivated to fix it up. It took us 4 months before we could acutally move in then it was a work in progress each year after that but within 3 years we had a show place and for very little money. We bought the house and 15 acres in NC for $45,000 and sold it for $110,000 (had to move back to Florida because of a family illness, etc. -- but moving to a farm in Virginia soon!) We only invested in materials approx. $5,000 for the fixing and that was over 3 years. The key is "do it yourself" and don't expect to have it all done at once. We started first with just making it livable - fixing the shower so it worked, new toliet tank workings, big time cleaning, painting, etc. Then we moved in and did the other big jobs - fixing the tong and groove floor boars, painting the outside, fixing the porch porch steps and rails, etc. Then finally the cosmetic things - putting up wallpaper, refinishing the hardwood floors, etc. Just remember no one is setting you a time limit on when it has to be done. Yeah, as long as you have a roof over your head and a bathroom and kitchen sink that works the rest will get there.

Also, I have to agree that you should NEVER buy anything with restrictions! Find another area! Restrictions tend always get MORE restritive...never less! Country living is about freedom.

Also, if you are short on cash and credit, take your time and do some looking. There are things out there for owner financing or land contract. Some people get in a pickle and need to unload fast and will do whatever it takes to dump a place. You just need to be patient and look, look, look.

Best wishes!

-- Karen (db0421@yahoo.com), July 14, 2001.

Stephanie, I am currently coming up on the end of year 2 of building, and sometimes I wonder if there will ever be an end in sight. LOL!

I bought bare land with the intention of building due to the influence of a younger brother (Oh, it'll be easy! We'll have the house up before the snow flies! It'll only take a couple of months!).

Like 6 months into this venture and without even a foundation at that time, he married a woman and moved in to town. That was the end of that.

I had been out here for a year before I could even get a start on the house, and it'll be 2 years come mid-August. Three years since I got out here, 2 years since getting the poles up (pole framed house).

If I had it to do over, I would NOT buy bare land. The money I've sunk into development - well, getting the power run up here, trying to build and making tons of mistakes, some of which are fixable and I am fixing, some of which are not and I can only hope for the best and take steps to mitigate the problem. I could have bought a place with established orchard, fencing, a small house, a barn and several other outbuildings - for less than I have in this place, and have been living under a roof (instead of a 14' travel trailer with no bathroom facilities) the whole time.

I second the advice people have been giving re restrictions. If there are restrictions, you don't want to make it your permanent home. Look elsewhere.

There is another possibility - sweat equity. Buy a fixer upper, fix it up, and resell. Use the cash from the sale as a downpayment on another place. Keep doing this until you have the money to get someplace where you want to stick. I had friends who did this back in the 80s. There are several advantages to this - chief among which is that you get to make your mistakes somewhere you don't have to live with them! LOL! Seriously, its a good way to get practical building skills.

Some possible negatives are that you will essentially be living in an uproar and mass confusion for years, as you move into one place, fix it up, then just as it starts to be liveable, you up and sell it and start over somewhere else. Having to live around the clutter of renovation is no joke, and it will quickly drive you up the wall if you're the least bit of a neatnik. Another thing to be careful of is the character of the neighborhood or area where you buy - you need to be sure you can actually sell the place for more than you have in it.

And finally, the nature of the repairs needed is important as well. Your quickest turnover and highest possible return of income will be from a place that has lots of cosmetic flaws. Like, it needs paint, or carpet or other flooring. Or the bathroom is really really old. Tub enclosures are pretty cheap nowadays and spiffing a bathroom up with a new sink, countertop, or even a toilet is cheap and easy. Spiffing up a kitchen can also be done fairly quickly and easily - there are all sorts of ways to camoflauge (I know that's not spelled right, but its the best I can do) ugly old cabinets. Like paint the base units. Get a stencil kit for that Country Look, plus the stenciling can help to distract the eye from potential flaws in your paint job, LOL! Put new spiffy looking doors on them, sand and line the shelves. Put down new vinyl flooring. Doesn't have to be expensive, you can often get closeouts and discounted flooring that looks very nice for not much, especially if you're not trying to make it YOUR dream home (ergo you don't have your heart set on a particular look or pattern).

Some things that can really run into money out of your pocket that won't have a good return on investment (in fact you'll be lucky to break even) are foundation problems, major structural repairs of any sort, having to rewire or replumb (unless you are an accomplished electrician or plumber). If you're capable of doing the work, things like having to replace floor beams etc. don't need to be sticking points in your final home, but in a place you're planning to sell at a profit - don't do it. You won't get your money back because its the sort of thing that's "invisible". Folks can SEE new paint and vinyl flooring. They can't see all your hardwork repairing major structural flaws. So they won't pay for it.

That said, it IS possible to build as you go. But take it from me, it ain't easy, and it sure does get tiresome. I wish I had listened to folks who told me to have one of those metal pole barn packages erected out here first shot out of the barrel, but I was listening to my brother (it'll only take a couple of months!). Around here I can get a 23x40 shell up with 10' sidewalls for around $5,000. Even if I had to camp out in it while I built I'd have been better off. For one thing, I wouldn't be paying $70 a month to keep my stuff in storage. For another, I could much more easily have closed in a section and finished the interior and be much more comfortable now than we are in this travel trailer. For yet another, I need the barn anyway. Building it first would have saved me a lot of heartache, discomfort, and about $2500 (over a 3 year period) in storage fees.

20/20 hindsight ...

Hope that's some help.

-- Sojourner (notime4@summer.spam), July 14, 2001.

Your posts have really made me think...a lot! Also, some of you who didn't post were kind enough to email and I thank you all.

I guess what I didn't tell you is that I'm 40 and hubby is 58. Both of us are working a job that has great benefits, long hours and is wearing us out. Our days go from 14 to 8 hrs, depending on the season. Both of us working while the other is off.

Both of us are handy to a point, but neither one of can honestly say we would be willing to try the fixer upper thing while being resident managers of a storage facility. That would mean that we would have to use our time off totally devoted to driving back and forth and trying to get as much done as we can in our spare time. EQUALS more exhaustion.

Our goal initially was to have a place to go to to get away from here. The more I thought about it the more I realized that he is almost to the age of retirement and we don't really have anything to show for it except worn out bodies and mostly paid off debts. Yippee!

Oh, and finally, a good credit rating.

So, I reckon, what we are going to shoot for, unless God blesses us unexpectedly, is to get the land. Pay for the cabin kit which is supposed to be able to be put up in a day. Then add on as we can afford. We have also thought, since we work for Uhaul, of getting a dealership and use part of the property to turn it into a storage facility. That would always provide us with some decent income and I think after we are here a while longer that we should be able to get a business loan, using the job experience as a qualification.

That way, we are not tied down to the job, we still get to have some peace and quiet, I still get my garden, rabbits and chickens and we have something past hubbies retirement.

At least, I think that would work. Hubby isn't a planner, he lives day to day. I'm the goal setter and I don't like the idea of living on his social security benefits when he decides to retire.

If there are any social security benefits by that time.

-- Stephanie Nosacek (pospossum@earthlink.net), July 15, 2001.