Buying Vacant Land for a Custom Home

In today’s Farm Talk show, Paul Ward shares valuable facts and on what to consider when planning to build your dream home on vacant land.

He tells a story of a woman, a land owner, who came to him with a problem – she had bought a parcel out in the country four years earlier but had never built on it.

They found, after reviewing the comparable sales in the neighborhood, that she had paid too much for the land and would probably take a loss on the property.

Paul helps people analyze the pros and cons and crunch the numbers on buying property.

What To Consider When Buying Vacant Land:

• Land costs money and building costs money. Add that together and the cost may exceed other houses in the neighborhood.
• What is the cost per sq foot? It varies on the materials used. (It could range from $300 to $600.) Multiply that number by the number of square feet you are building.
• Permits cost money – you need a permit for everything you do.
• Utilities – how far is your parcel from a city or county road? If you are way out in the backwoods, water, electricity, natural gas, or propane needs to be routed to the house.
• There may be sewage issues. Properties out in county don’t have sewage – you will need a septic tank.
• Earthquake requirements – you might need caissons.
• Fire access: You will need a 20 foot wide driveway. Fire engines also need a large turn around.
• You need a water source – a 5,000 gal tank or a swimming pool.

Building a house on vacant land could cost you hundreds of thousands of dollars before you even put up a wall!

It may be good to do a cost comparison between building and buying a fixer upper out in the country. Depending on how long you plan to be in your house, you may be upside down when the house is first completed.

Listen to Paul’s show for more important details that will save you work and save you money when planning to build your dream home!

Transcript

Farm Talk: Buying Vacant Land with the Dream of Building a Custom Home

I’m Paul Ward with the Home and Ranch Selling Team and welcome to another edition of Farm Talk. Today we’re going to be talking about vacant land – specifically the idea of buying vacant land with the dream of building a custom home. Quite frequently I receive calls from folks who see vacant land for sale out in the country and they want to explore the idea of building their dream home. I just wanted to run through some considerations when buying vacant land. You can look at these items and do a side by side comparison of buying land with the hope of building a home versus buying an existing country home and remodeling it and making it yours.

I’m going to start with a little story. I got a call about a week or so ago from a lady who bought a parcel out in the country. She paid quite handsomely for it with the hope of building her dream home, and she never did. She’s owned it for about four years and is now looking to turn around and sell it. We quickly went through the comparable sales in the neighborhood, in terms of what finished homes would look like, and through that conversation she realized that she paid too much for the land – if you add the cost of the land to the cost of building, the finished product is going to exceed the values of the other homes in that neighborhood. Somebody could easily buy an existing property in her neighborhood for less, so she’s probably going to end up taking a loss on that parcel. To avoid that, if you are considering buying land, at least here in Ventura County, and you want to build a house, there are some things that you should give serious consideration to.

1. What is the cost per square foot of building?

That cost of building is going to vary wildly based on the materials you use. If you want linoleum floors and Formica counters, that’s going to be different than if you want travertine floors and granite counters. So bare bones is probably in the $300 per square foot range, and that could quickly rise $400, $500, even $600 a square foot depending on the materials that you use. Multiply that number by the number of square feet that you’re building and that should give you a rough final number in terms of the cost of building

2. Permits

People don’t realize how much permits really cost, and the county wants their cut, or the city in some cases; they want their fair share. For everything that you do you’re going to have to get a permit. That, and general contractors are typically going to add the cost of the permits into the price per square foot. You don’t really see a direct benefit with the permits. It’s just a requirement.

3. Utilities

How far is your parcel from a county road or a city road? If you’re buying out in the backwoods, you might have to trench utilities quite a distance, so the cost could be in the tens, or even the hundreds of thousands of dollars depending on the distances. You’ve got to think about water, electricity, and natural gas. If natural gas is not available, you would add propane but you’d still have to put in a propane tank and trench that to the house. You have to keep the tank a certain distance away from the house. And then most properties out in the country don’t have sewers, so you’re going to have to put in a septic tank. Depending on where you are, it’s going to be probably a minimum of about $15,000, but that can quickly rise.

4. Earthquake Requirements

One thing people don’t realize is earthquake requirements. So, especially if you’re going to build up on a hilltop or a hillside, you might need caissons. These are pilings that reach down through the dirt to reach bedrock, and the requirements here in California are quite extensive. Before you even put up a wall you could be literally in the hundreds of thousands of dollars. Not so much with the older homes, but with a new home you’re going to have to reach the earthquake requirements.

5. Fire Access

What does the fire department want you to do? You’re probably going to have to have a 20-foot-wide driveway and turnaround. The fire department is not going to be backing up their fire truck on your property. They’re going to want to be able to turn their truck around without backing up. Then you’re going to have a water source. If there is a fire, where is the fire department going to get the water? You’re going to need a least a 5,000-gallon water storage tank or a swimming pool that they could hook up a draft fire hydrant. Depending on the size of the home, you may need sprinklers in the ceiling of the home. You definitely want to consider the fire codes.

So, if you’re thinking about building out in the country, it’s a good idea to do a cost comparison of building from scratch versus buying an existing home, even a fixer upper, and making it yours. If you’ve always had a dream about building a log cabin or a Spanish hacienda and maybe you’re going to live there for 10, 15, 20 years, it might not matter to you that you’re going to be upside down when the home is first completed. But if you think you’re not going to be there for too long, or in the off chance you need to sell quickly after you build, you may very well be upside down because the cost of building could easily exceed buying an existing home and doing some remodeling. So just some things to consider when buying vacant land and possibly building your dream home out in the country. I don’t want you to make the mistake of overpaying for the land and then being upside down when you complete your home.

We’d love to hear from you! As always, feel free to email Paul@homeandranchteam.com or message us.