Raw Land for Retirement

Posted by: Toddi Gutner on April 25, 2006

A few months ago I blogged about whether my husband and I should buy a vacation home. The idea was that we will use it in the next ten years as our home in retirement. One of the blog readers suggested buying raw land instead. Not a bad idea, I thought.

Then an email showed up in my in box that described “tips on buying land for a second home in the country: Common mistakes to avoid and essential features land buyers should look for.” Of course, it was pitch from a representative of a private home community, Quechee Lakes, Vt., that would appeal to second home buyers turned retirees. But the tips still had value to me.

I figured if I was thinking about the transition to my retirement then some portion of the 77 million other baby boomers might be thinking the same. So with them in mind, I thought to address what buyers should look for - and avoid - when buying a country house lot.


First, a few questions you might ask: Is a heavily wooded lot a wise choice? Will I tire of shade, and will that affect my gardening? What about a lot close to a lake? Will I incur more maintenance fees due to the proximity of water and have a future mildew/moisture issue?

You’ll also want to consider some of these tips:

* The importance of the lot's orientation and location. You’ll want to think about what geographic direction your future second home will face and consider the lot's exposure to the sun; southern exposures give more sunlight and warmth, but western exposures afford lovely sunsets. You must also be aware of the lot's proximity to lifestyle services.

* Access to necessities. Will the lot have access to electricity, public drinking water and town sewer lines? If not, have you considered the expense of hooking up to town electricity, installing your own well and maintaining a private septic system?

* The value of a second opinion. You should be an informed consumer and hire a civil engineer to assess the lot. Civil engineers offer an objective opinion and can address your site layout expectations. For instance, if this property could handle a specific home orientation or a driveway placed "just so", and the condition of the land and drainage issues.

Reader Comments

michael

April 26, 2006 3:15 PM

Is there a market for second home buyers that want to have a 20 acre parcel in southern Vermont that is 25 miles from several ski areas, 12 miles to town, certified organic land for gardening,cross country skiing, bird hunting,snow mobiling and hiking ?

Marlow Harris

April 27, 2006 3:54 AM

I think buying raw land for retirement purposes is not a good idea for most people.

For one thing, banks will not usually loan money on raw land, so one must pay cash for it. That means lots of dough sitting in a piece of dirt. So you've lost the opportunity costs and the amount of interest the money could be making if it was in the bank instead. Plus, you probably have to pay property taxes on the land, and maybe have some liability insurance too, in case someone walks on it and twists an ankle or something.

However, if you buy an existing vacation property for your future retirement, you have all the pleasure of using it now, perhaps on weekends if it's close by, or at least on summer vacations and long holidays if it's further away.

In addition, you have the option of renting it out, either for vacation holidays or full-time. You'll get income, plus tax write-offs and depreciation. And, once you retire and move into in, you only have to live in it a few years to convert it to your personal residence. You can then sell it and pocket the profit, tax-free, just like you can when you sell your own personal residence.

Doc Holliday

August 25, 2007 11:27 AM

Marlow,
I think you need to research your advice before giving it.

Raw land, if purchased in the right place and in the right amount is a solid investment for people who know what their retirement requirements will be.

Unless the land is extremely poor in nature, you most certainly can find financial institutions that will loan money to make the purchase, especially if they know, at some point, that you will be shopping for a future construction loan. There will be a higher down payment requirement and probably shorter term financing (15, possibly 20 years). However, financing is out there if you know where to look.

Knowing the area you intend to make your purchase in is critical and there are a multitude of ways to continue making money off of that land until you choose to build. Logging, farming lease agreements, to mention a couple are ways to make your idle "raw" land return a dividend.

You open your comments by saying that raw land purchase is NOT a good idea for most people. I strongly disagree with you when you say "most." I think you need to learn to "temper" your comments.

Additionally, and, on occasion, a purchase of raw land can be made with "seller financing." Although this is the exception rather than the rule, owner financing is something one should consider.

Marlow, if you are a real estate agent, turn your efforts to selling property. If you are not, I suggest you start educating yourself a bit more.

One last thought on this matter is that I would advise against purchasing land advertised on television. This land is generally undevelopable and most inaccessable to the average person. I have seen deals for land in Wyoming that, if you want to access it, you better plan on going in on horseback.

Renee

September 26, 2007 4:28 PM

Can you expense / write off raw land
on your taxes

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Johnbeck success stories

March 29, 2008 7:29 AM

Homeowners who aren’t losing their homes must prioritize their tax payments to avoid steep penalties and the potential for

tax liens being placed on their property

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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