Buying land versus real estate, permitting, power, pitfalls

Fyi this is research vs. active, so don't spend a ton of time on an answer. But you guys are such smartie pants, I wanted to put it out there.

We want to move to the hills outside of the city, 2-5 acres. The housing market has SPIKED, and we are already picky, so what we want would be too much. (And I'm not getting into a bidding war when our housing market has already gone up 30% - 35%+ plus on properties in 3 years or so.)

Even a pre-built house would be well/septic where we want, so I'm not worried about this.

I know each state/county is different on building laws/costs, permits, but I'm wondering if buying land then building later might make sense in locking down an area we want, without paying a crazy inflated price.

A) I can always sell the land later if we change our mind, and it's an area close to an urban growth boundary, in the hills, and a hot area. Prices can increase or drop, but it's an area I am confident will either increase value, or hold. (If it depreciates, the land is much less than a house, so it wouldn't bankrupt us, it'd just be upsetting.)

My question is on "raw land" in Skamania County Washington. If power is at the property line its easier. If it's not, I've heard that can be REALLY pricey. Septic and well we'll have to install, period. I also know some lots have CCRS, some don't.

So,

1) is it better to pay less for land with power NOT at the property line (but close) or pay more for power at the property line?
2) Taxes. A home in this area would be about 5k annually on tax. How are taxes on raw land as opposed to developed?
3) I've read there can be some heavy permitting costs involved when turning truly "raw land" into "ready for a residential build". Any thoughts?
4) Any other tips/nightmares from people who have bought raw land, or ready to build lots?
5) Any tax rules on how soon you can sell after buying, if we DO find that rare house we want?

FYI we are not looking boonies raw land, it's R5 zoning that is plotted out for residential use, and close to the city (15 miles) .

I just know some on here have bought land, and might have some insight. While I'd like to find a pre-existing home, I also know land is still affordable now, but probably won't be in 5-10 years as the urban growth boundary expands...

Thanks all, and I know, VMB is social media, and I will do other research, but you guys have a WEALTH of knowledge, which I always enjoy tapping!



PS if we bought land, we'd not develop for a few years, so pitfalls of this too...

 

That puts me out of the discussion!

Best wishes on your research, @Multifarious5!

RICHARD

 

@Richard Alpert I welcome ANY of your feedback! If you have experience with raw land, I'm a million percent interested. I'm just veering towards some infrastructure as I'm scared of being bit by unexpected permitting fees. It IS in the boonies, just close enough in 10-15 years it probably won't be.

The housing market is just too hot right now, so I'm looking at ways to lock in acreage for down the road! (And before the land gets too pricey too)

 

Our house arrived in halves. Half #1 beat Half#2 by six days.

Doublewide Dynasty!

The biggest headache was getting power to our trailer of love.
We had a neighbor (at the time) who initially signed a deed, but wouldn't let the power company cross an 80' stretch along the edge of his unused pasture, which resulted in a half-mile detour and an additional $3500 expense. Thankfully our power company waived the extra expense.

Rural life does have its perks. We don't have to go to the zoo. The critters come to us!
Our property taxes are about $1500 for the year. We have 7 acres. House is on 1 and bride's dad farms the other 6.

I hope you can find a nice piece of land on which to erect your @Multifarious5 Mansion someday!

RICHARD

 

I know Texas is different. But we may be looking at land to build on at some point. Land 5-10 acres where we could get an ag exemption on taxes. And put up a Barndominium. They have very nice ones. Less expensive & energy efficient. I would only consider land that at least had electric to the property edge. Good luck and happy hunting.

 

Richard I am SO glad I prodded you to reply, this is AMAZING feedback! You have absolutely done what I'm considering, buying a little land in a "critter-abundant, people-not" area. And I am SOOOOO jealous over 7 acres. Everyone is going crazy with subdivisions, so I want to make SURE we have enough land to be subdivision-free. I might not own bunny slippers, but I want a house where if I did, I could hang out on my porch in bunny slippers and a robe and no one would be the wiser!

Also, your additional expense was EXACTLY the type of pitfall I was looking for, so I can be forewarned.

I cannot thank you enough Richard, this was PRICELESS advice, and you are always amazing!!!

And @Valgal thank you so much too, and I love that you are on the same page of "neighbor-free living". We have good neighbors, but I just want space and serenity. Hey, my dad was a Geologist and hubs is a field biologist, it's in my blood to want nature

 

We bought land (part of an old tobacco farm) - just under 7 acres in rural NC, but 30 miles from my university job, so not bad. All growth in our area has been in the other direction - our county is very poor, schools suck etc. But we don't have kids and it was super cheap to buy & build, so we don't really care.....

We owned the land ~2 yrs before starting to build - we started doing "improvements" (landscaping, some light grading etc - nothing that affected the tax value). My husband did almost all the construction - in our county, you do not have to have a contractor's license to build your own primary residence, at least not in 2001 you didn't (I'm also quite positive he could pass the licensing test should he ever desire it....) We had some stuff contracted out - precast concrete foundation walls, some of the exterior framing & roofing, septic. We had to get the fancy engineers in to get the land to perc (and pay for a fancy-ass septic as well) but that was a purchase condition so we knew that going in. We have power our neighbors house (and we're set back from the road about half a mile, and from them as well) so we just paid to have the power be underground from that pole to our house. A little more expensive up front but worth it in the long run, I think.

We lucked out on the well - didn't have to go too deep. The well diggers might be able to give you an idea of the norm in that area....

Good luck! We built our house the first year we got married, bought the land in 1999, got married in 2000, started building house in 2001, moved in Dec 2002. It took us a year to do the blueprints (yes, we did those ourselves too!) and we had some arguments. It was a great lesson in communication for us as newlyweds, honestly. The best part is - almost 20 yrs on - there isn't much we would change in the overall design! We've finished & updated things along the way - added more garages (we're up to 8 bays now), but in general - the floorplan still suits us perfectly. So I advise taking your time as much as possible and getting what you want!

 

Couple things I can add is some of your biggest expenses will most likely be power, septic, and water. Somewhat like you, we bought a house on land in an area in the UGB (but not yet annexed into the city) in need of some repairs. There are a couple shops on the property that do not have power, so I got an estimate from the local utility and was told it was going to be about 4K to drop a line from a pole 5 feet away! Also, the septic is in need of replacement and costs for an “advanced” system is looking in the 15k range. I was told it is getting difficult to get a standard gravity system approved. This is in central Oregon BTW. Property taxes should be pretty cheap on just raw land with no improvements. Our property is actually 3 tax lots with the house being on 1. That is where the bulk of the taxes go, the other 2 smaller parcels are maybe a couple hundred a year. Be aware that once you get annexed, your property taxes will go up just due to the services the city is required to provide. Not sure on land, but for a house I believe the capital gains tax (up to a certain dollar amount) get waived after 2 years of primary residence.

 

Read this book, even if you plan to hire a contractor. Also call your building department and ask about the permitting process, and call the power company and ask about the connection process.
Then plan a very liberal budget. Then triple it.

I don't recommend taking on a project like this while you have a full time job. My wife and I built an addition to our house ten years ago and I was so distracted by the project and all of the complications that I it almost cost me my job, even with my wife on it full time while on maternity leave. It's all encompassing.

 

Actual permitting fees may be the least of your concerns. Actually developing can jump up and bite you...like the power issue raised above.

Keep in mind, that land can always be sold... but could take a long long time. Look how old some of those for sale signs are.

Biggest concern would be cash. So much of this stuff can not be easily financed like a house can be. Banks want something they can sell if needed, and a half developed lot or home is usually not what they want.

Best of luck and keep digging for information.

 

Not all property is above a safe, reliable, sustainable ground water supply. You'll want to discuss it with a well driller to determine the probability of finding water and the costs of putting in a well. You can make the purchase contingent on a suitable water supply but you'll have to commit to the costs of drilling a test well before the deal closes. Of course land with no water isn't worth very much.

 

Is the land clear? (trees?) Will the zoning authorities expect you to mow the grass every week before you start construction? I have a few pieces of land around town, 4 acres and 28, the 28 is no problem, it's a hay field, the 4 acres though, the city wants it mowed. I dance with them every summer to only brush hog it once, right before they call me to scream.

just something to think about

And I'd want the electric to my property line.

 

I can't offer much as all my land-use experience is in CA. As for you question on when the undeveloped land is reappraised, some jurisdictions will assess a partial value for the construction if not completed by the annual trigger date and others would appraise when the CoO is approved.

I'm not sure anyone can crystal ball what might happen value-wise in relation to urban/rural limit lines.

 

One thing you will definately want to do is to find out how much the taxes are on the land as it sits.

A couple years ago my wife and I decided to buy a lot (residential neighborhood, not the boonies) and build a house. We fell in love with one particular development, but it was at the top end of our budget. So, we decided to buy the lot and sit on it while paying off debts and saving up more money. I used home equity from our nearly paid-for house to buy the lot outright. Seemed like a good idea at the time.

But, building costs and materials just keep on going up, up, up. Sub-contractors are so busy around here that they can keep raising their prices. So, we as save up more money, we aren't really getting anywhere because of the building costs. $500k (not that we were gonna go that high) 2-3 years ago would get you a custom built home with higher end finishes. Now, for that same $500k the house would be smaller and borderline cookie-cutter (same neighborhood).

And the other kicker is the taxes on the lot. Around here your primary residence property taxes are capped at 1% of accessed value plus any local add-ons. But, since the lot is considered residential and we don't live there we have to pay 2% because we can't claim a homestead or mortgage exemption on it. We also have to pay a local school referendum tax - for vacant land and for schools our kid can't go to (yet).

But on the bright side, lessor lots are selling for $15k-20k more than we paid for ours - so we could easily recoup our money if this whole plan doesn't work out.

 

My understanding is that, at least in California and probably elsewhere, R5 is residential multi family of 5 units or more. if you buy this lot to build a single family home, neighboring lots could be developed into apartments, which would adversely affect your property value. If the lot seems like an unusually good deal, maybe that's why?

 

Given what she shared, I'd say in this WA county R-5 is a rural-residential designation with a five-acre minimum. If they're past the urban limit line no way this is a CA multi-family/high-density R5.

 

Bingo, you're going to get a lot of good answers, but the answers may NOT apply to your situation. Your best bet is to talk directly with the governmental entity (city and/or county) where the property is located... check to see if the property is zoned to allow what you want to build and if the property is a legal lot (meaning the property was not illegally subdivided). Check to see what kind of "public improvements" (well and septic or connecting to a sewer line; drainage; paved road; connecting to electrical power/phone, etc.) might be required prior to or in conjunction with building a home.
Some jurisdictions can be very bureaucratic regarding permitting while some rural jurisdictions can be very simplistic...It's best to get the right answers prior to purchasing anything.

 

There are a lot of great answers here, but my general view is that trying to buy, develop, power, utility and permit raw land if you’re not experienced is a fools errand. There are always specific exceptions based on where the land is, but generally if it was a great place to build a house you might want to ask yourself why someone else hasn’t already done it. That’s a good starting point quality control check.

My one excursion into trying rural development was to build a nicer, bigger, more modern house on a beautiful piece of hill country property we already owned. We had power and water, but we needed more water (new deeper well), different purification system, a relocated bigger septic field, a much bigger underground propane tank to also fuel a standby generator, a better access road, a lot of permits, much higher local building costs and twice as long to complete as our most generous estimate. It turned out well as a labor of love, but there was nothing easy or economical about it. I’d surely not want to repeat.

OK, to be fair, by hindsight our property over time has become an extraordinary country hideout worth six times what we have in it, but it was one of those endeavors about which one of my neighbors said, “Looks easy, but it ain’t.”

 

There's going to be another major recession / depression in less than 5 years. Save your money and buy the house you want then?