How to justify buying a little piece of property?

[two_bit_score]

Running cattle on $35k an acre land doesn’t sound very profitable to me

With 15 he would likely qualify for an Ag exemption and the taxes would be almost nothing on 14 of those acres.

 

[Carl_NH]

IFast forward a few months, the developer offered us a chance to purchase the 3.06 plus 22.54 acres of the 41 acre plat.
I know this is a once in a lifetime opportunity, and they don't make any more dirt. Expanding our land like that would be awesome, but for the $230k it would cost me, I can buy a new CTL / Mini-Ex and make money. The 15 acres we are developing will keep me busy long until I can't do it anymore.

There appears to be a ROW on the lower left corner of the 33 AC off My Zion Rd. Find out who owns this strip of land and then you have a saleable lot of 10 or so acres and maybe come out even. The issue is these 22 acres are landlocked and landlocked value is up to the abutters only.

So either buy at a better price w/o access (say 5K per acre) or buy that strip of land get a deeded ROW access for road and electric then it becomes valuable.

 

[grsthegreat]

About 6 years ago a neighbor that had allowed us to run our horses on her 10 acres wanted to sell it and move. I really didnt want more land, but wife really liked having it to let horses out.

she wanted 69,000 for it. I thought that was ridiculous high, but wife nagged me into buying it . She took 65k cash sale.

today i could get $300,000 easy for it. Neighbor down the way has 10 acres on market for $499,000. Nothing on it. Hes nuts. That will never sell…..or will it.

 

[shooterdon]

$35k/acre for what??? A bit of privacy? He has no comps to see what it is worth.

Like I said earlier, if you need privacy, sell what you have, spend the additional $350k and buy LOTS OF LAND in a more remote area.

The OP wanted to know if he could farm it to break even. Seems he cannot afford it unless it generates enough to cover the note on $350k, taxes and operating costs...what will that be?

OP, DO NOT LISTEN to enablers. If you have a CPA talk to them. Nearly everyone telling you to buy it has not told you how to cover your costs...only the "feel good" stories of their purchases that worked out for them. And none of them invested $350k. Even in bidendollars that is a lot of change.

 

[Torvy]

That's a lot more than here in the Piney Woods. Maybe 5x the price. We paid less than $5k an acre 2-3 years ago.

Are they pricing it for housing developments? Or are you really close to a city or Interstate hiway?

If you could buy the 10 keep some near you and develop some to sell at a profit. Otherwise, you are probably stuck seeing someone else develop it.

 

[Yander]

$350k is a lot more to some than it is to others. That is a lot of money to me. You can give up on trying to recover the cost with anything conventional (i.e. Hay, crop farming, beef etc.).

Unless you are a multi-millionaire and that is not much to you, I would pass.

 

[etpm]

Where I live it is semi-rural. All the land around me is zoned at 5 acres minimum. Smaller lots can be grandfathered in but if you have a 9 acre parcel you can only build one house. If there are wetlands this restricts house building and well drilling even more.
We are on 10 or 12 acres and there is a 5 acre parcel adjacent to our land with a creek running through it along with associated wetlands. The parcel is long and narrow and the creek and wetlands run the length along one side. The side farthest from our land. There is a house, a double wide actually, that is about 50 years old. And two shallow wells.
Because of the wetlands on one side and our property line on the other side it is hard to build a house. The existing house in fact encroaches on the property line setback by several feet.
My wife and I would like to buy the parcel. Our son and daughter in law live there now. My wife and I bought our parcel 29 years ago, we occupied the house we had built 17 years ago, and have lived within 3 miles for 28 years.
Even with the wetlands and the crappy house and the shallow wells and the rural 5 acre minimum zoning the land next to us might be worth as much as 70 grand. Per acre. And my wife and I are willing to pay it. Not because we can make money from it, but because we will be able to control who lives there. And because we will be able to protect it.
In fact, controlling who lives there is only part of the reason we want the land. The extra land next to ours would give us more land to build walking trails. And the wetlands would be included in the trail system. My wife and I both love the wetlands. There are no fish as far as we know but lots of frogs. And the water flows year 'round and because of the topography a pond could be easily made. And our trails could be connected to trails on some neighboring property, trails that we already have permission to walk on. Also, as I said previously, we can protect the land. It is a nice parcel and we don't want to see it get logged off. Or have neighbors who dump all their garbage on the land. Stuff like that. If we own it then we can do our best to protect it. Like on the land we own now where we use no pesticides or herbicides.
The upshot is that there are lots of reasons to buy land. Making money off of the land right away may not be the only reason to buy land. In our case we plan to never make money from the land. We expect to give it to our son and his wife when we die. Land is different from other purchases because there is truly a finite supply. Even so the value can change for many reasons. Zoning changes, the economy, the proximity of new shopping centers are all examples of things that can cause drastic changes in valuation.
So you need to decide why you want the land, then you can decide if you want to pay the price. I know that if we are able to buy the land next door we will really have a hard time parting with the money. But a few years later we will be glad we made the purchase, especially me because I will have 5 more acres to use my tractor on.

 

[airbiscuit]

X 2 on talking with a CPA. Find out what kind of tax savings/depreciation schemes might be available. The most money for the least work on property that I know of is Storage Units.

 

[quicksandfarmer]

If $35k/acre is really the market value, what is someone willing to pay that going to do with the land?

 

[4570Man]

With 15 he would likely qualify for an Ag exemption and the taxes would be almost nothing on 14 of those acres.

I don’t know where the OP is located but taxes in TN are already cheap. I pay like $200 for an undeveloped 4 acre piece of property and it’s in the city limits which charges about the same amount again. Cutting my $400 tax bill certainly wouldn’t persuade me to spend $350,000.

 

[needmoredirt]

$35k/acre for what??? A bit of privacy? He has no comps to see what it is worth.

Like I said earlier, if you need privacy, sell what you have, spend the additional $350k and buy LOTS OF LAND in a more remote area.

The OP wanted to know if he could farm it to break even. Seems he cannot afford it unless it generates enough to cover the note on $350k, taxes and operating costs...what will that be?

OP, DO NOT LISTEN to enablers. If you have a CPA talk to them. Nearly everyone telling you to buy it has not told you how to cover your costs...only the "feel good" stories of their purchases that worked out for them. And none of them invested $350k. Even in bidendollars that is a lot of change.

Privacy is non-issue, this is rural enough. It's only worth what someone is willing to pay, "comps" mean nothing, tax authority numbers mean little to nothing as well (taxes are zero - call it worth $1 or $1M, matters not). This small undeveloped piece isn't worth a developers time or someone that wants to build AFAIC.

There are plenty of houses around to buy, as slim as the pickens are. $750k or $1M can buy a nice ready to roll place and they aren't flying off the shelves unless it's a steal.

I'm not looking to break even, but having to even buy gas and burn time mowing needs to be justified to some degree.

Really don't need a CPA, figured I'm not the only one wanting to cover some costs and it's ALL out of wack historically speaking. Seems cattle, chicken, goat farmers aren't here or making enough to mention. shrug.gif

At any price, my OP would not change much.

 

[1 Old Man]

Today's market is all screwy, w/bidone economics.

Need to make it pay me, don't need hookers/blow, deer, doves or feral pigs.

Can I say that w/out the bannage???

No desire to "sell and make $".

I agree, totally screwed up. Make $ to cover the initial cost of $350,000 will be tough. How much land do you already own, is it "in Ag"?. If not already in Ag it will take a few years before it will convert. IF the adjacent 10ac is already in Ag, you should be able to keep that exemption (and possibly get your current
property to convert, maybe). Tx has multiple Ag/Timber exemptions available. Open land, wildlife, timber, almost any farming crop or animal activity. There are a few rules but.....anyway, depending on your location you may be able to build a small cabin to rent out as a bed & breakfast/weekend cabin etc. Or maybe a small RV space for travelers, or a nature trail type property to rent out for school kids to day hike through, dig a tank or two big enough to raise catfish. etc etc etc None of the above will make up the $350k any time soon. Not knowing more about your individual location or financial situation, no one on this
board will be able to give you the answer you're looking for. I feel your pain wanting a buffer zone.
Remember the old real estate adage, location, location, location. Good luck.

 

[shooterdon]

Sorry OP

Saw your tag line…”too much month ar the end of the money”

Assumed you were like most Americans and not flush with cash. Figured that is why you were wondering how to make some money off it.

If you really want the land and can afford it, just do it. You can always sell it down the road.

 

[319Quahog]

I'm in sort of a dilemma now as well. Our current property shown in the picture below is right at 11.15 acres. The diagram below shows it at 10.73, due to the GIS not being very accurate on the county site. Notice the LARGE plat to our left... it's right at 41 acres, with an existing home built on it, back in 1977. Our property line on our left side, is straight at the moment. We have a VERY thick "bottom" and a nice stream running on our left side property line. We had the land developer re-survey, to allow our property line to follow the center of the stream. That added 3.06 acres of adjacent land to our current plat. What that does is shore up our borders, and not allow someone to put a deer stand right on the corner of our existing property line.
View attachment 849493

Fast forward a few months, the developer offered us a chance to purchase the 3.06 plus 22.54 acres of the 41 acre plat. The plan was to have my brother move up and build in the lower left corner of that 22 acres. However, he decided he would not move up from Florida. My issue is not the cost of the land, or the price. It's the fact that I don't have direct access to it, unless I cut a road in along the outside of the stream. We had it surveyed to give us plenty of room for the road, but the extra expense just to get back there is too much to take in. It's plenty wooded, TONS of deer, turkey, hog, etc... I'd LOVE to have 36 acres, but we are having to pass on the extra land. We did pick up that 3.06 and now our property line follows the center of the stream perfectly.

View attachment 849494

I know this is a once in a lifetime opportunity, and they don't make any more dirt. Expanding our land like that would be awesome, but for the $230k it would cost me, I can buy a new CTL / Mini-Ex and make money. The 15 acres we are developing will keep me busy long until I can't do it anymore.

That proposed lot would probably drive me nuts.

While sort of by accident, I purchased an almost rectangular 39 acres back in 2021. Surveyed about six months prior to me buying. Stone walls form the left and right boundaries, one of the only paved roads in the town form the front boundary, and the rear abuts the power lines, and a couple houses. The rectangular lot is so convenient. Tons of wildlife ranging from moose down to squirrel and every northern NH critter in between. The larger animals almost always follow the trails that have been cut in for many years prior to me buying.

Living in a house build in progress on that lot since July. Working on this land will keep me busy-and heated from firewood until the day I die.


I don't know enough about TX land to chime in on the OP's situation, but 35K per acre seems steep. We don't do mineral etc rights in NH-your land is your land. I know I overpaid at 5.4 ish an acre, but the lot was just what I was looking for and I was sick of driving around and looking.

 

[two_bit_score]

I don’t know where the OP is located but taxes in TN are already cheap. I pay like $200 for an undeveloped 4 acre piece of property and it’s in the city limits which charges about the same amount again. Cutting my $400 tax bill certainly wouldn’t persuade me to spend $350,000.

It can be a lot higher in Texas depending on where it's located. But you completely missed my point. If he got the Ag exemption he would pay very little in taxes compared to the value of the property. There are a lot of places where $35k an ac is very reasonable. Esp for a small acreage tract. It being adjacent to his already makes it worth considering. The taxable value of the property is important if he is not going to develop it soon ad he would probably much rather pay Ag rates than subdivision rates.

For example I am considering an investment property of 4+ ac in a small town in Texas that the asking price is >$470,000 ($105,500 per ac). Now if I was able to pay Ag tax rates for the next 10 years or whatever until I decide what to do with it that is much preferable than paying the regular property tax rate.

 

[two_bit_score]

At any price, my OP would not change much.

Well, then that is crystal clear. You either want it or you don't. Sounds like you can afford it either way. So if you actually "need more dirt" there it is right next to you. Make the seller an offer. Buy it or don't buy it.

 

[SethWilliams]

I'll chime in from a livestock perspective. What is the owner currently doing with the land? Is there any potential for another farmer to lease the land? Most of the time, 10 acres isn't enough to justify a farmer coming a long distance to take care of livestock or cut hay. Not sure how prices are around you, but most land leases around me for 10 acres wouldn't be worth more than a couple thousand (at most) a year.

In terms of putting cows on it, is it fenced? Does it have a water source? How is the grass stand on it? If that was beside me, I have the infrastructure, equipment, and foundation to put another 6-8 cows on 10 acres and have 8 calves every year that would profit me $1,000 per calf. If you don't have any of the setup already, I wouldn't recommend it. Don't think it would make sense financially.

 

[Rockbadchild]

The only thing justifying that price is if you can sell it at 40k or more tomorrow, if its a typical asking price for your area their is no reason to think it wont go up in the future. In my experience land always go up in price never goes down.

 

[two_bit_score]

The only thing justifying that price is if you can sell it at 40k or more tomorrow, if its a typical asking price for your area their is no reason to think it wont go up in the future. In my experience land always go up in price never goes down.

A very experienced real estate broker/developer/investor once told me: "It's hard to make land pay for itself. But in most cases you should still buy good locations."

You can pencil out all the scenarios you want and even if it never seems to work out on paper you probably should still buy it if its in a good location. In the OP's case the lot being adjacent to him makes it a pretty dang good location. All we know about the price is what the owner is ASKING. That has limited relationship with what it might actually sell for. I watch RE properties closing for sometimes up to 50% of asking prices. Yes, those are rare. Even in Texas, which has had an overheated sellers market, I still see closings for significantly less than asking. The longer it stays on the market the more likely the seller will reduce the price - usually to someone who offered him money. Some sellers never reduce the public asking price but still accept less from a bona fide buyer with a good offer.

There are too many things we don't know about the property to even be trying to evaluate if it's "asking" price is 'too high' or 'doesn't make sense financially', etc. But if it's adjacent to you and you have the money and want it, you should make the owner an offer. Or regret it later.

 

[Rockbadchild]

A very experienced real estate broker/developer/investor once told me: "It's hard to make land pay for itself. But in most cases you should still buy good locations."

You can pencil out all the scenarios you want and even if it never seems to work out on paper you probably should still buy it if its in a good location. In the OP's case the lot being adjacent to him makes it a pretty dang good location. All we know about the price is what the owner is ASKING. That has limited relationship with what it might actually sell for. I watch RE properties closing for sometimes up to 50% of asking prices. Yes, those are rare. Even in Texas, which has had an overheated sellers market, I still see closings for significantly less than asking. The longer it stays on the market the more likely the seller will reduce the price - usually to someone who offered him money. Some sellers never reduce the public asking price but still accept less from a bona fide buyer with a good offer.

There are too many things we don't know about the property to even be trying to evaluate if it's "asking" price is 'too high' or 'doesn't make sense financially', etc. But if it's adjacent to you and you have the money and want it, you should make the owner an offer. Or regret it later.

Good point on the asking price vs what they get it for...

Around my area historically land made money just by sitting on it, I don't think its the case everywhere but my point is if you can sell for price paid + inflation + tax paid then the land is free... In my area people would buy land for 10k and 20/30 years later they sell it for 75k. Tax on a vacant land is $300 a year that's $9000 over 30 years which bring them to 20k investment plus 20k for inflation you get a 15k return, that land paid for itself and they made money.

The land I own was sold for $1500 by my grand father, that's $4000 in today money plus $9000 in tax over 30 years and I paid the same land for 25k few years ago (he was asking 40k) he made a marginal $3000.

With that being said its easy to see my land selling for 80k today (I think i've scored on mine since it was pre covid land fever) but hard to see the land sold today for 80k selling for 160k in 10/20 years.

To me this is one way to justify buying land, now could they predict it back then and who can predict if that trend will continue who known but this exercise can be done if you have that information, I got to know this because we live in a small town and people talk, it might be harder to know in bigger centers.