In a previous post I mentioned a few parts of the Leavenworth real estate market that I thought held the most promise for great deals. In the post I mentioned:
Kahler Glen Condos
New Construction Condos in Leavenworth
Cabins in Ponderosa Estates
Building Lots in Ponderosa Estates
First Time Homes in Leavenworth
David - contemplating a purchase of a lot in Leavenworth writes in:
Geordie, what do you think of the market for developed lots in Leavenworth?
We are considering buying a lot and eventually building a house. At the time we decided to pursue this, we were not ready to buy a home and did not have the money for a condo that was big enough for us (we were not looking for a rental, we were looking for a permanent home someday). It seemed at the time that the market was pretty hot, and we wanted to “get a foot in the door” so that when the time came, we had something already. Now the market has changed, and we are wondering if this is the best way to go. We will most likely not be buying anything this year, but aren’t sure if now is a good time to buy a lot, especially if in the future we decide to buy a home and then would have to sell the lot.
Warren Buffet's advice always seems timely:
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Certainly over the last 6-12 months, buyers in the real estate market have been fearful. In earlier years, they were greedy. Currently, there aren't as many buyers for undeveloped lots as there once were and the availability of financing the purchase of lot is not what it once was.
If you are buying a lot in a place that you want to build a home and live in, I think this could be a great time. Generally, we expect land costs to be 1/3 to 1/4 of the cost of a home. Don't buy a $200,000 lot to build a home that is only going to be worth $400,000. Or viewed another way, don't buy a $100,000 lot in a neighborhood full of $200,000 homes.
If you are buying as an investment, do your research on who is buying and building in that neighborhood. Are there hidden costs - sewer, water, slope, that make building there prohibitively expensive?
Buying a home already built is most often cheaper than buying the land and building. There are so many great programs right now to buy a home that I wouldn't recommend building instead of buying for the "average" person. If you have special requirements for a house or special talents, then maybe building will work.
Remember that real estate is a fairly illiquid investment. You may not be able to sell a building lot when you need to or for the price you hope to. Please don't buy any real estate if you are hoping to make a quick buck.
I 'll leave you with one of my favorite pieces of advice: