Should I Purchase My Neighbor's Home?

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Cruise
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Should I Purchase My Neighbor's Home?

Post by Cruise »

Hoping that clear-thinking Bogleheads might help me think through this issue:

We live in very close proximity to one neighbor who is putting her home up for sale. Being a "little old lady" who lived alone and did not have any visitors, the close proximity was never a problem as she was very quiet.

Her home is very old and it is highly likely that the next purchaser will tear it down and rebuild. If torn down, or even renovated, the hassle in our lives will dramatically increase: There will be construction noise and dust literally a few yards from us, and our shared driveway will be a big hassle to keep clear of construction vehicles so we can ingress and egress.

Once rebuilt, a new home may have a dramatically larger and more intrusive footprint, and multi-generational families that make a lot of noise compared to our now-tranquil setting.

Given our concerns noted above, my wife and I have been toying with just purchasing the property. We have no interest in renovating it or renting it. We have never been landlords or developers and don't want to start now. Our thought is to purchase this tear-down and actually tear it down. We would keep the land vacant until we sell our own home, and then sell the then-empty lot next to it as well. Having both lots available for sale might be attractive to a high-end purchaser as both lots have incredible views. Or, the two lots could be sold independently. We don't know how long it will be until we decide to move, but pre-COVID, we were starting to look into moving into a condo for single-floor living and not having to be responsible for exterior upkeep.

We have zero debt.I'm mostly retired with a good pension and social security. My wife still works, but has a great pension once she desires to retire, and social security. The pensions are as guaranteed as one can have a guarantee. Once she retires, our real income will stay about the same since she won't be contributing to various retirement vehicle. This is all before our RMDs start in a few years, and our incomes will balloon. Most of our assets are in vehicles like SPY (or equivalent), QQQQ, or total market.

The purchase of the home next door would be accomplished by taking a mortgage in an amount that would be about 10% of our net worth. Our down payment would be 5% of our net worth and would not require any sales of equity positions. The down payment amount roughly would be equivalent to 90% of our annual income. The yearly mortgage payment (15 year note) would be about 14% of our annual income, and property taxes adding another 4%. So, the annual cost of the mortgage and property taxes on this vacant land would be about 18% of our annual income.

From a mental health perspective, buying the property and avoiding the noise of construction and neighbors make this a no-brainer. I know we could afford the purchase, but wonder what issues I am not including in the financial/other analysis. Of course, I have considered opportunity costs of the down payment money and money going into the mortgage and property taxes.

So, any thoughts from the group here would be appreciated. I know that the are real estate investors and other great thinkers, so thank you in advance for your input.

(Edit: Decision has been made).
Last edited by Cruise on Tue Aug 03, 2021 6:10 pm, edited 1 time in total.
Normchad
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Re: Should I Purchase My Neighbor's Home?

Post by Normchad »

Tearing down a house, and then leaving a safe lot can be expensive. Make sure you have a good idea of what that will cost before making a decision.....
Lalamimi
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Re: Should I Purchase My Neighbor's Home?

Post by Lalamimi »

BIL did this at his lake home. The property only had a teardown and a boat house, but he loves the new view and land. Its now the only vacant lot on that end of the lake... I would do it. We are on an acre and the elderly lady next door is in a house brought to her land in 1960. When she passes, the daughters will sell and a huge house will go in. Like the one two lots over across the street being built n ow. My daughter bought a $1M home 2 yrs ago (built in 2014) in a nice popular neighborhood that is going through tear down and builds. 5 new ones since she moved in. Turn it into a beautiful garden, refuge, etc. Be sure to find out all the permits needed to demolish though. and if you can, combine them so you can get homestead exemptions on both if possible.
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Sandtrap
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Re: Should I Purchase My Neighbor's Home?

Post by Sandtrap »

Given your concerns and information given. . . this is a great idea.

There are some "logistical" matters that might generate additional expenses and maybe "hassles" that you should be aware of.

1. Removing a dwelling on a property. (hire a licensed reputable G.C. specialized in this, permits, etc)
2. Rendering the property safe and so forth after dwelling removal.
*There are utilities such as water, power, gas?, etc, to the property that will be disconnected up the main or some point.
(more on this later)
3. The property will be devalued.

You might want to think of some sort of interim measure to retain some degree of property value and useability. Can you afford to remodel and renovate to a minimal degree of cosmetic attractiveness and utility such that you can then use the property as a guest house for yourself?

Before you do this, meet with a few G.C.'s in your area and get a ballpark price for removing the home and disconnecting and/or removing all the utility feeds up to the mains, etc. If the price is higher than you'd like, then don't do it, or find some alternative path.

FWIW: I did this a few years ago for my son. His home was a a beautiful property on the side of a mountain, but the home was on the edge of the property line. So, if a home were built above him, it would not be good. We purchased the lot above him with good results and increase the value of the total area greatly.
I also have a 35 acre vacant but partly developed property in front of me that I'd like to buy but the owner has never been motivated to sell despite knowing my intentions. (I think there's a movie about this. . . . )
j :D
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thewizzer
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Re: Should I Purchase My Neighbor's Home?

Post by thewizzer »

You had me until the part where you said you were looking for a condo pre-COVID. When the pandemic ends, will you be ready to move again? If so, it hardly seems worth the hassle to me.
mw1739
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Re: Should I Purchase My Neighbor's Home?

Post by mw1739 »

Unclear to me how you plan to structure the transaction, but you will have to do a cash out refi on your own home to accommodate the purchase. You can’t take out a mortgage and then tear down the bank’s collateral (without plans to rebuild).
Dontridetheindexdown
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Re: Should I Purchase My Neighbor's Home?

Post by Dontridetheindexdown »

This could be a good way to diversify your investments, and to also purchase enhanced quality of life.

You can definitely afford to do this.

In my opinion, it only makes sense if you plan to stay in your house for several, perhaps many years.

If you are seriously considering an imminent move to a condo, you should avoid this investment.

if you plan to stay for only a few more years, you should also avoid this investment.

If you are committed to remaining in your present home for perhaps seven to ten or more years, it just might be worth doing.

Keep in mind that your dreaded scenario "a dramatically larger and more intrusive footprint" might increase the sale price of your own home.

If indeed you are "starting to look into moving into a condo for single-floor living and not having to be responsible for exterior upkeep" then by all means, do not buy the property next door, it will only impede your plan to downsize.
Mike Scott
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Re: Should I Purchase My Neighbor's Home?

Post by Mike Scott »

If you were planning to stay "forever" then maybe.
Looking to move "soon" then no.
If you had enough cash to write a check without blinking then probably.
Buying this will only make it harder to sell and move.
Wanderingwheelz
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Re: Should I Purchase My Neighbor's Home?

Post by Wanderingwheelz »

If you’ve been seriously considering simplifying your life by moving into a condo, what’s the big risk that you end up with a neighbor you can’t tolerate? Just move to a condo. Right?

Way simpler than buying a second home only to tear it down and then move into a condo.
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Re: Should I Purchase My Neighbor's Home?

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (home).
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hudson
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Re: Should I Purchase My Neighbor's Home?

Post by hudson »

Cruise wrote: Wed Nov 11, 2020 7:37 pm The purchase of the home next door would be accomplished by taking a mortgage in an amount that would be about 10% of our net worth. Our down payment would be 5% of our net worth and would not require any sales of equity positions. The down payment amount roughly would be equivalent to 90% of our annual income. The yearly mortgage payment (15 year note) would be about 14% of our annual income, and property taxes adding another 4%. So, the annual cost of the mortgage and property taxes on this vacant land would be about 18% of our annual income.
If you can afford it, go for it.
I see this as a luxury purchase. It's a nice to have extra. If I was in the same situation, I would also consider it.
You would have a down payment, a 15 year mortgage, and demolition expense. You would be paying for a house then demolishing it.
That's a huge purchase and follow up expense.
You are also speculating that you can get your money back in the future.
Personally, I would have heartburn. I probably wouldn't do it unless I could pay cash for everything.
I would want the total bill to be a very small percentage of my investment portfolio.
The bottom line: If your holdings are extensive and you have money to burn, you are good to go.
Last edited by hudson on Wed Nov 11, 2020 8:53 pm, edited 1 time in total.
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celia
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Re: Should I Purchase My Neighbor's Home?

Post by celia »

So you don't want noisy neighbors or construction noise, but don't mind a vacant field full of weeds and allergies and mosquitoes?

Unless you have a good use for the land, I wouldn't do it.

I'll bet a new owner will rent it out for a while. You can't tell what will happen. I've seen tiny, unkept property turned into a rental and huge, almost new, houses torn down by a new owner.
Trader Joe
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Re: Should I Purchase My Neighbor's Home?

Post by Trader Joe »

"Should I Purchase My Neighbor's Home?"

No, I would not do this.
000
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Re: Should I Purchase My Neighbor's Home?

Post by 000 »

No. I think what you propose will likely make your life even more complicated than dealing with construction next door. The only exception for me would be a rural property with no other neighbors that I planned to stay at for a long, long time.
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Cruise
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Re: Should I Purchase My Neighbor's Home?

Post by Cruise »

Normchad wrote: Wed Nov 11, 2020 7:48 pm Tearing down a house, and then leaving a safe lot can be expensive. Make sure you have a good idea of what that will cost before making a decision.....
Thanks for that. My realtor is investigating.
Lalamimi wrote: Wed Nov 11, 2020 7:56 pm BIL did this at his lake home. The property only had a teardown and a boat house, but he loves the new view and land. Its now the only vacant lot on that end of the lake... I would do it. We are on an acre and the elderly lady next door is in a house brought to her land in 1960. When she passes, the daughters will sell and a huge house will go in. Like the one two lots over across the street being built n ow. My daughter bought a $1M home 2 yrs ago (built in 2014) in a nice popular neighborhood that is going through tear down and builds. 5 new ones since she moved in. Turn it into a beautiful garden, refuge, etc. Be sure to find out all the permits needed to demolish though. and if you can, combine them so you can get homestead exemptions on both if possible.
Thanks for your input. In my case, combining the lots may be a bad idea as keeping them separate offers more options for eventual sale.
Sandtrap wrote: Wed Nov 11, 2020 8:00 pm Given your concerns and information given. . . this is a great idea.

There are some "logistical" matters that might generate additional expenses and maybe "hassles" that you should be aware of.

1. Removing a dwelling on a property. (hire a licensed reputable G.C. specialized in this, permits, etc)
2. Rendering the property safe and so forth after dwelling removal.
*There are utilities such as water, power, gas?, etc, to the property that will be disconnected up the main or some point.
(more on this later)
3. The property will be devalued.

You might want to think of some sort of interim measure to retain some degree of property value and useability. Can you afford to remodel and renovate to a minimal degree of cosmetic attractiveness and utility such that you can then use the property as a guest house for yourself?

Before you do this, meet with a few G.C.'s in your area and get a ballpark price for removing the home and disconnecting and/or removing all the utility feeds up to the mains, etc. If the price is higher than you'd like, then don't do it, or find some alternative path.

FWIW: I did this a few years ago for my son. His home was a a beautiful property on the side of a mountain, but the home was on the edge of the property line. So, if a home were built above him, it would not be good. We purchased the lot above him with good results and increase the value of the total area greatly.
I also have a 35 acre vacant but partly developed property in front of me that I'd like to buy but the owner has never been motivated to sell despite knowing my intentions. (I think there's a movie about this. . . . )
j :D
Thanks for your input. I think we are in a similar situation to your son. Thanks too for your comments on logistical matters.
thewizzer wrote: Wed Nov 11, 2020 8:01 pm You had me until the part where you said you were looking for a condo pre-COVID. When the pandemic ends, will you be ready to move again? If so, it hardly seems worth the hassle to me.
Yes, COVID has thrown a wrench into our planning. For now, moving is the furthest thing from our mind.
mw1739 wrote: Wed Nov 11, 2020 8:04 pm Unclear to me how you plan to structure the transaction, but you will have to do a cash out refi on your own home to accommodate the purchase. You can’t take out a mortgage and then tear down the bank’s collateral (without plans to rebuild).
Yes. Have already talked to my banker about this. Thank you.
Dontridetheindexdown wrote: Wed Nov 11, 2020 8:12 pm This could be a good way to diversify your investments, and to also purchase enhanced quality of life.

You can definitely afford to do this.

In my opinion, it only makes sense if you plan to stay in your house for several, perhaps many years.

If you are seriously considering an imminent move to a condo, you should avoid this investment.

if you plan to stay for only a few more years, you should also avoid this investment.

If you are committed to remaining in your present home for perhaps seven to ten or more years, it just might be worth doing.

Keep in mind that your dreaded scenario "a dramatically larger and more intrusive footprint" might increase the sale price of your own home.

If indeed you are "starting to look into moving into a condo for single-floor living and not having to be responsible for exterior upkeep" then by all means, do not buy the property next door, it will only impede your plan to downsize.
Many thanks for your comments. The condo move is not imminent due to the COVID situation. Right now, we don't know what we don't know, so unsure how much longer we will want to stay in a single family home. Re down-sizing, we are not necessarily looking at that: Some of the condos we were looking at have larger square footage than our home.
Mike Scott wrote: Wed Nov 11, 2020 8:19 pm If you were planning to stay "forever" then maybe.
Looking to move "soon" then no.
If you had enough cash to write a check without blinking then probably.
Buying this will only make it harder to sell and move.
Decisions, decisions. Without perfect access to information. Thanks for your input.
Wanderingwheelz wrote: Wed Nov 11, 2020 8:22 pm If you’ve been seriously considering simplifying your life by moving into a condo, what’s the big risk that you end up with a neighbor you can’t tolerate? Just move to a condo. Right?

Way simpler than buying a second home only to tear it down and then move into a condo.
Thank you for your thoughts. The problem is that we are not ready to move to a condo with COVID raging. So we might be in a position of having to endure a year of construction and not being ready to move to a condo.
hudson wrote: Wed Nov 11, 2020 8:47 pm
Cruise wrote: Wed Nov 11, 2020 7:37 pm The purchase of the home next door would be accomplished by taking a mortgage in an amount that would be about 10% of our net worth. Our down payment would be 5% of our net worth and would not require any sales of equity positions. The down payment amount roughly would be equivalent to 90% of our annual income. The yearly mortgage payment (15 year note) would be about 14% of our annual income, and property taxes adding another 4%. So, the annual cost of the mortgage and property taxes on this vacant land would be about 18% of our annual income.
If you can afford it, go for it.
I see this as a luxury purchase. It's a nice to have extra. If I was in the same situation, I would also consider it.
You would have a down payment, a 15 year mortgage, and demolition expense. You would be paying for a house then demolishing it.
That's a huge purchase and follow up expense.
You are also speculating that you can get your money back in the future.
Personally, I would have heartburn. I probably wouldn't do it unless I could pay cash for everything.
I would want the total bill to be a very small percentage of my investment portfolio.
The bottom line: If your holdings are extensive and you have money to burn, you are good to go.
Thanks for your thoughts. It is a huge purchase, but not likely to make or break us (unless there is a dramatic event that destroys the ground under us). But, we don't readily play around with 1/6th of our net worth, so not a cavalier decision for us to be making.
celia wrote: Wed Nov 11, 2020 8:50 pm So you don't want noisy neighbors or construction noise, but don't mind a vacant field full of weeds and allergies and mosquitoes?

Unless you have a good use for the land, I wouldn't do it.

I'll bet a new owner will rent it out for a while. You can't tell what will happen. I've seen tiny, unkept property turned into a rental and huge, almost new, houses torn down by a new owner.
Thanks for your concerns and assessment. Actually, we live next to a large nature park, so there is nothing new that an adjacent vacant lot would add. Of course, if we owned it, we would maintain it.
Trader Joe wrote: Wed Nov 11, 2020 8:57 pm "Should I Purchase My Neighbor's Home?"

No, I would not do this.
Thanks.
000 wrote: Wed Nov 11, 2020 9:16 pm No. I think what you propose will likely make your life even more complicated than dealing with construction next door. The only exception for me would be a rural property with no other neighbors that I planned to stay at for a long, long time.
Actually, aside from the old lady, there is really only one other neighbor (who rarely visits his home). So while we are not in a rural area, because of the nature park and the absent neighbors, it might be perceived as "semi-rural." How do you think this purchase would make our lives even more complicated? Thanks.
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Re: Should I Purchase My Neighbor's Home?

Post by 000 »

Cruise wrote: Wed Nov 11, 2020 9:42 pm How do you think this purchase would make our lives even more complicated?
More debt, more insurance, more property taxes, another lot to sell when you move. Possibly difficulty or higher rates getting the insurer to insure a vacant lot. Depending on how big these lots are, possibly trespassers coming on the land out of sight from your house.
BFR
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Re: Should I Purchase My Neighbor's Home?

Post by BFR »

One thing to note - when you try to sell a vacant lot, banks are unable to provide financing anywhere as good as compared to a lot with a house on it. Therefore vacant lots can sometimes trade at discounts.
Saving$
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Re: Should I Purchase My Neighbor's Home?

Post by Saving$ »

1. Have you confirmed the lot is buildable if you demo the existing home? In some areas there are homes on non conforming lots. Existing non conforming is allowed, but once the existing is demo'd, there is sometimes no way to build new and be conforming.
2. Does the house have a basement? If so that will increase your costs of demo as you will need to fill in the basement
3. Does the house have any asbestos or lead paint? This will increase your demo costs.
4. Does your municipality allow you to demo an existing house without permitting a new one? Some do not, as they don't want to lose the property tax on the improvements.

If the above are satisfactorily answered, go for it.
One other thought is that you noted you are considering moving to a condo, where you may have neighbors below and above, in addition to each side. I can't possibly see how construction next door could more objectionable than a bad neighbor at a condo...
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Watty
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Re: Should I Purchase My Neighbor's Home?

Post by Watty »

One risk to keep in mind is that you could own the vacant lot for ten years and find that when you are ready to sell it that it is difficult, expensive, or impossible to get all the permits that you would need to build on that vacant lot. For example I have heard of situations where there was a moratorium on new building permits because the sewer system was at capacity.

It was a lot different situation since it was in a rural foothill area but I also know of a situation where someone owned land they planned to build their retirement home for a long time. When they were ready to build there was a five acre minimum that had been added and they only had about 4.8 acres. They could not buy 0.2 acres from an adjacent landowner or get a variance so they basically had an expensive campsite that was not worth a lot since it was not buildable.

You could also eventually want to sell it during a bad housing market when few people are looking for lots to build new homes on.
Cruise wrote: Wed Nov 11, 2020 7:37 pm Having both lots available for sale might be attractive to a high-end purchaser as both lots have incredible views. Or, the two lots could be sold independently.
The problem is that just like you any future buyers of your house would assume that they would end up living in a construction zone for a year then have some unknown huge house right next to them. That would make your house undesirable for people people who don't want, or are unable to afford, the vacant lot too.

Just for brainstorming here are some suggestions.

1) You could buy the property then build a modest size house on it that is laid out so that it does not affect your privacy. You could then move it to it, rent it, or sell it.

2) You could see if the person living on the other side of the house would be interested in buying it then you could split the lot so that each of your houses would in effect be on a large lot.
Saving$
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Re: Should I Purchase My Neighbor's Home?

Post by Saving$ »

OP wants to move to a condo to have one level living and lower maintenance.

Buy the lot and build a one story house. It will be new so maintenance will be less. And you will have fewer neighbors than a condo. Use the proceeds from the sale of your current house after it is all done to hire out routine maintenance of your house next door.
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Re: Should I Purchase My Neighbor's Home?

Post by J295 »

I didn’t try to evaluate the financial aspect, but the substance of the decision makes sense to me. For some of us, a tranquil home environment is a great gift that you like to preserve if you’re able
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Re: Should I Purchase My Neighbor's Home?

Post by hudson »

Cruise,
Great reply...probably in the top 10 all time!
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JoeRetire
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Re: Should I Purchase My Neighbor's Home?

Post by JoeRetire »

Cruise wrote: Wed Nov 11, 2020 7:37 pmThe purchase of the home next door would be accomplished by taking a mortgage in an amount that would be about 10% of our net worth.
You plan to get a mortgage on the house next door? Then tear it down? Check with your mortgage company about that plan first. Many would not allow it, since your loan would be secured by the new house.

Also, check in with your town to see if you would be permitted to keep the empty lot as a separately salable housing unit into the future. Zoning laws might not permit that.
So, the annual cost of the mortgage and property taxes on this vacant land would be about 18% of our annual income.
That's a lot of money to spend on an empty lot.

If it was me, I'd wait to see what actually happens down the road. If the new owners/occupants made it unbearable, I'd just move and find a home I could enjoy for the long term.
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FoolMeOnce
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Re: Should I Purchase My Neighbor's Home?

Post by FoolMeOnce »

Have you considered purchasing the house and not tearing it down? If you think you might move in a year or two, why bother? Just leave it vacant (with whatever precautions are necessary re: utilities, safety, etc) and let the next purchaser decide whether to tear down or keep it. This also expands the future market of potential buyers. Consider how much the value might decrease in a short time period and decide if that cost (and transaction costs, interest, tax, etc) is worth the quietude. Plus the chance that the loss is smaller or nonexistent.
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Re: Should I Purchase My Neighbor's Home?

Post by TomatoTomahto »

J295 wrote: Thu Nov 12, 2020 6:24 am I didn’t try to evaluate the financial aspect, but the substance of the decision makes sense to me. For some of us, a tranquil home environment is a great gift that you like to preserve if you’re able
+1.

I lived next to a tear down and subsequent construction of a McMansion. Not again if I can avoid it.
I get the FI part but not the RE part of FIRE.
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Re: Should I Purchase My Neighbor's Home?

Post by egrets »

I haven't read all the replies, but I would do it. It is horrible living next to someone building and then living in a McMansion. You can have the ground leveled and planted with lawn so it is not a weedy mess. You would even have room for a nice garden, vegetable or decorative. Keep the lots legally separate so you have options in terms of selling.
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Re: Should I Purchase My Neighbor's Home?

Post by egrets »

JoeRetire wrote: Thu Nov 12, 2020 6:59 am Also, check in with your town to see if you would be permitted to keep the empty lot as a separately salable housing unit into the future. Zoning laws might not permit that.
Oh, right. I own two vacant lots side by side and the town forced them to be consolidated, because the town's minimum lot size had changed.
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TomatoTomahto
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Re: Should I Purchase My Neighbor's Home?

Post by TomatoTomahto »

egrets wrote: Thu Nov 12, 2020 8:21 am I haven't read all the replies, but I would do it. It is horrible living next to someone building and then living in a McMansion. You can have the ground leveled and planted with lawn so it is not a weedy mess. You would even have room for a nice garden, vegetable or decorative. Keep the lots legally separate so you have options in terms of selling.
Or, plant some vegetables but install a meadow. The pollinators will love it, and it won’t require 1/10 of the maintenance.
I get the FI part but not the RE part of FIRE.
barnaclebob
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Re: Should I Purchase My Neighbor's Home?

Post by barnaclebob »

I certainly wouldn't blame you for doing this. You are trading one type of asset for another + having more control over your life. Control over your life is worth a whole lot. (heyo!)

The house in front of ours just might be a teardown one day and it might be possible to build a slightly taller house which would cut into but likely not eliminate our view. I absolutely love my house and have had similar thoughts as you. Buying their house when the time comes would allow me to trim some trees and further improve my views. What I have going for me is that their house is waterfront and doing anything construction related within a certain distance of the waterfront is nearly impossible. The lot is also on the small side so it wouldn't be possible to put a McMansion on it.
Last edited by barnaclebob on Thu Nov 12, 2020 8:34 am, edited 1 time in total.
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galawdawg
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Re: Should I Purchase My Neighbor's Home?

Post by galawdawg »

While I love the tranquility of living on our small farm on acreage, that sounds like a very significant amount of money to spend and put at risk to forestall what is at this point only a possibility of some negatives for a few years between now and when you and your wife are fully retired and likely to again seriously contemplate moving.

Here are a few specific thoughts:
  • At this point, you don't know what will happen to your neighbor's property. It may not sell for months. A purchaser may purchase it and live in it or otherwise leave the property as is. If it is purchased as a tear-down, construction may not begin for months or longer.
  • If a new house is built next door, putting up a temporary chain link fence along the property line and a silt fence at the base will prevent incursion of persons, construction material and equipment, and soil. Construction itself is likely to last less than a year (and perhaps much less than that) so the duration of such an inconvenience will be limited.
  • If a new house is built next door, it may result in an increase in neighborhood property values and benefit to you when you sell your home.
  • If you purchase the house next door, you will incur ongoing expenses, such as taxes, maintenance and such. If you tear it down, you will incur substantial cost in demolition and proper removal of all debris. You may still be required by your local government or HOA to maintain the vacant lot. If you don't tear it down, you will still need to do some maintenance and upkeep and will need to take steps to keep the vacant house from becoming an attractive nuisance and drawing vagrants, squatters or others who could vandalize the property or worse.
  • If you purchase the house next door, that is one additional property for you to sell when you do move. You may find it difficult to sell, you may not recoup your investment and you will incur transaction costs.
  • The hassle factors of owning and eventually selling the property next door may far outweigh the hassle factors of possible construction of a new home for a limited period of time.
If you were going to remain in your current home for many years, I'd say absolutely. But considering that you may decide to relocate within the next few years, I'm not sure that the negatives of a purchase outweigh the possible negatives of not purchasing to the extent that it is worth the significant investment of time and money.

Good luck in whatever you decide!
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gr7070
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Re: Should I Purchase My Neighbor's Home?

Post by gr7070 »

It appears I'm in the minority who find your concerns rather trivial. Dust outdoors? Humans of various ages living next door? Gasp.

I can't fathom doing this, especially with a tear down for only two?! years worth of "tranquility". Note the tear down will have some of the same concerns you have with construction, just a shorter duration.

Meh.

You're going to move soonish. Step that up if you really hate the situation.
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Re: Should I Purchase My Neighbor's Home?

Post by FoolMeOnce »

barnaclebob wrote: Thu Nov 12, 2020 8:30 am I certainly wouldn't blame you for doing this. You are trading one type of asset for another + having more control over your life. Control over your life is worth a whole lot. (heyo!)

The house in front of ours just might be a teardown one day and it might be possible to build a slightly taller house which would cut into but likely not eliminate our view. I absolutely love my house and have had similar thoughts as you. Buying their house when the time comes would allow me to trim some trees and further improve my views. What I have going for me is that their house is waterfront and doing anything construction related within a certain distance of the waterfront is nearly impossible. The lot is also on the small side so it wouldn't be possible to put a McMansion on it.
Depending on local rules, you could purchase, add a height restriction to the property, and resell.
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hand
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Re: Should I Purchase My Neighbor's Home?

Post by hand »

Cruise wrote: Wed Nov 11, 2020 7:37 pm
Given our concerns noted above, my wife and I have been toying with just purchasing the property. We have no interest in renovating it or renting it. We have never been landlords or developers and don't want to start now. Our thought is to purchase this tear-down and actually tear it down.

...

The purchase of the home next door would be accomplished by taking a mortgage in an amount that would be about 10% of our net worth. Our down payment would be 5% of our net worth and would not require any sales of equity positions. The down payment amount roughly would be equivalent to 90% of our annual income. The yearly mortgage payment (15 year note) would be about 14% of our annual income, and property taxes adding another 4%. So, the annual cost of the mortgage and property taxes on this vacant land would be about 18% of our annual income.

Unless you are planning to take a mortgage on your existing home, these two statements are likely incompatible - as you might imagine, a lender is unlikely to be OK with lending you money with a house as collateral and then having you destroy the house!
FeesR-BullNotBullish
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Re: Should I Purchase My Neighbor's Home?

Post by FeesR-BullNotBullish »

gr7070 wrote: Thu Nov 12, 2020 8:48 am It appears I'm in the minority who find your concerns rather trivial. Dust outdoors? Humans of various ages living next door? Gasp.

I can't fathom doing this, especially with a tear down for only two?! years worth of "tranquility". Note the tear down will have some of the same concerns you have with construction, just a shorter duration.

Meh.

You're going to move soonish. Step that up if you really hate the situation.
I mostly agree with you. However, the deal breaker for me is the potential footprint of the new house. It can't be fun going from openness to an imposing two-story wall literally three feet from your property line. Remember when the garden used to get sun?
aristotelian
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Re: Should I Purchase My Neighbor's Home?

Post by aristotelian »

How about going on vacation during the construction?

This obviously makes zero financial sense but you do not need Boglehead approval for lifestyle choices. Seems like a huge waste of capital but go for it if it makes you happy.
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Re: Should I Purchase My Neighbor's Home?

Post by JoeRetire »

egrets wrote: Thu Nov 12, 2020 8:24 am
JoeRetire wrote: Thu Nov 12, 2020 6:59 am Also, check in with your town to see if you would be permitted to keep the empty lot as a separately salable housing unit into the future. Zoning laws might not permit that.
Oh, right. I own two vacant lots side by side and the town forced them to be consolidated, because the town's minimum lot size had changed.
I looked into purchasing an adjacent lot years ago, but backed out when the zoning board gave me a similar ruling.
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Re: Should I Purchase My Neighbor's Home?

Post by barnaclebob »

FoolMeOnce wrote: Thu Nov 12, 2020 9:08 am
barnaclebob wrote: Thu Nov 12, 2020 8:30 am I certainly wouldn't blame you for doing this. You are trading one type of asset for another + having more control over your life. Control over your life is worth a whole lot. (heyo!)

The house in front of ours just might be a teardown one day and it might be possible to build a slightly taller house which would cut into but likely not eliminate our view. I absolutely love my house and have had similar thoughts as you. Buying their house when the time comes would allow me to trim some trees and further improve my views. What I have going for me is that their house is waterfront and doing anything construction related within a certain distance of the waterfront is nearly impossible. The lot is also on the small side so it wouldn't be possible to put a McMansion on it.
Depending on local rules, you could purchase, add a height restriction to the property, and resell.
What are the mechanics of this? Buy the property, transfer "air rights" or something like that then sell it?
IowaFarmBoy
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Re: Should I Purchase My Neighbor's Home?

Post by IowaFarmBoy »

I don't think this question has been asked- How much will the value of the property decrease if you tear the house down? Or asking in another way, how much of the purchase price is the land vs the structure? For example, if you pay $150k and the lot is worth $120k, it feels a lot different to me than if you pay $150k and the lot is only worth $50k. The value of what I am tearing down is especially a factor if you are only there for a few years.
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Re: Should I Purchase My Neighbor's Home?

Post by veindoc »

I think you have more time than you think. If the house is a dump it may take time to sell. And if the buyer is likely to tear it down then there are architectural plans to be drawn, permits to be obtained etc. I’m sure none of those things will be done quickly in the time of Covid. I think you have a year, probably more. In that time I would be looking to move as you already stated you had planned to do.
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Re: Should I Purchase My Neighbor's Home?

Post by N1CKV »

I do not feel these two statements are consistent:
Cruise wrote: Wed Nov 11, 2020 7:37 pm Her home is very old and it is highly likely that the next purchaser will tear it down and rebuild. If torn down, or even renovated, the hassle in our lives will dramatically increase: There will be construction noise and dust literally a few yards from us, and our shared driveway will be a big hassle to keep clear of construction vehicles so we can ingress and egress.
Cruise wrote: Wed Nov 11, 2020 7:37 pm We don't know how long it will be until we decide to move, but pre-COVID, we were starting to look into moving into a condo for single-floor living and not having to be responsible for exterior upkeep.
In one you are worried about noise from new neighbors in close proximity, in another you are wanting to move to a place that shares walls with neighbors. The construction part is a non-starter, it takes what? 6 months? That is livable IF it even happens in the first place.
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Re: Should I Purchase My Neighbor's Home?

Post by FoolMeOnce »

barnaclebob wrote: Thu Nov 12, 2020 1:55 pm
FoolMeOnce wrote: Thu Nov 12, 2020 9:08 am
barnaclebob wrote: Thu Nov 12, 2020 8:30 am I certainly wouldn't blame you for doing this. You are trading one type of asset for another + having more control over your life. Control over your life is worth a whole lot. (heyo!)

The house in front of ours just might be a teardown one day and it might be possible to build a slightly taller house which would cut into but likely not eliminate our view. I absolutely love my house and have had similar thoughts as you. Buying their house when the time comes would allow me to trim some trees and further improve my views. What I have going for me is that their house is waterfront and doing anything construction related within a certain distance of the waterfront is nearly impossible. The lot is also on the small side so it wouldn't be possible to put a McMansion on it.
Depending on local rules, you could purchase, add a height restriction to the property, and resell.
What are the mechanics of this? Buy the property, transfer "air rights" or something like that then sell it?
Not exactly sure, but I know someone who has done it. Perhaps through a restrictive covenant. Perhaps through a view easement.
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Re: Should I Purchase My Neighbor's Home?

Post by jdb »

Been there done that. Our neighbors old house immediately behind us, we bought and tore it down to prevent McMansion being built. Best real estate investment, other than our house, we have ever done. We live in South Florida, planted tropical fruit trees and trees and shrubs for birds, a butterfly garden, put in nice lawn, started apiary with honeybees, my winter tomato crop in the back looking great, now have a full acre extra in back yard for us and friends and family (and the birds and honeybees and butterflies) to enjoy. Yes, taxes on the empty lot are high. But we kept it in a separate ownership so in future will be able to sell as a separate lot, and it increases in value every year by much more than taxes. Though we will never sell until sell our main house. So my advice is if you can afford it go for it. Good luck.
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Cruise
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Re: Should I Purchase My Neighbor's Home?

Post by Cruise »

000 wrote: Wed Nov 11, 2020 9:46 pm
Cruise wrote: Wed Nov 11, 2020 9:42 pm How do you think this purchase would make our lives even more complicated?
More debt, more insurance, more property taxes, another lot to sell when you move. Possibly difficulty or higher rates getting the insurer to insure a vacant lot. Depending on how big these lots are, possibly trespassers coming on the land out of sight from your house.
Good points, thanks. The land is not that big, so we would know if trespassers around.
BFR wrote: Wed Nov 11, 2020 9:55 pm One thing to note - when you try to sell a vacant lot, banks are unable to provide financing anywhere as good as compared to a lot with a house on it. Therefore vacant lots can sometimes trade at discounts.
Thanks for that. I've noticed in my community that vacant lots often are marketed with an architectural rendering.
Saving$ wrote: Wed Nov 11, 2020 10:08 pm 1. Have you confirmed the lot is buildable if you demo the existing home? In some areas there are homes on non conforming lots. Existing non conforming is allowed, but once the existing is demo'd, there is sometimes no way to build new and be conforming.
2. Does the house have a basement? If so that will increase your costs of demo as you will need to fill in the basement
3. Does the house have any asbestos or lead paint? This will increase your demo costs.
4. Does your municipality allow you to demo an existing house without permitting a new one? Some do not, as they don't want to lose the property tax on the improvements.

If the above are satisfactorily answered, go for it.
One other thought is that you noted you are considering moving to a condo, where you may have neighbors below and above, in addition to each side. I can't possibly see how construction next door could more objectionable than a bad neighbor at a condo...
Great points--thanks. Should be buildable. No basement. Original house built in 1948, so who knows what is up there. I need to talk to my realtor to find out what are my real options/limitations. Re condo neighbors--yeah, that is a real fear. Our old lady neighbor did not keep up her house, and if we had sold first, it would have decreased our valuation. However, she was so quiet, we have had a peaceful existence here. Unknown neighbors in SFH or condos are of a concern. One of the reasons we have not moved.
Watty wrote: Wed Nov 11, 2020 10:39 pm One risk to keep in mind is that you could own the vacant lot for ten years and find that when you are ready to sell it that it is difficult, expensive, or impossible to get all the permits that you would need to build on that vacant lot. For example I have heard of situations where there was a moratorium on new building permits because the sewer system was at capacity.
...

You could also eventually want to sell it during a bad housing market when few people are looking for lots to build new homes on.
Cruise wrote: Wed Nov 11, 2020 7:37 pm Having both lots available for sale might be attractive to a high-end purchaser as both lots have incredible views. Or, the two lots could be sold independently.
The problem is that just like you any future buyers of your house would assume that they would end up living in a construction zone for a year then have some unknown huge house right next to them. That would make your house undesirable for people people who don't want, or are unable to afford, the vacant lot too.

Just for brainstorming here are some suggestions.

1) You could buy the property then build a modest size house on it that is laid out so that it does not affect your privacy. You could then move it to it, rent it, or sell it.

2) You could see if the person living on the other side of the house would be interested in buying it then you could split the lot so that each of your houses would in effect be on a large lot.
Thanks for your inputs. Your brainstorm #1 was something I've considered, but it further puts us into the RE developer mode, something about which I have no experience. I should talk to my realtor about this.
Saving$ wrote: Wed Nov 11, 2020 10:48 pm OP wants to move to a condo to have one level living and lower maintenance.

Buy the lot and build a one story house. It will be new so maintenance will be less. And you will have fewer neighbors than a condo. Use the proceeds from the sale of your current house after it is all done to hire out routine maintenance of your house next door.
Another good suggestion that we have considered as an option. Certainly constructing a new home will give us an undesired hobby that will last for some time.

An additional expense in all options that involve us moving, is that it would force my wife to retire as she could not handle her demanding position and packing/moving at the same time. Yes, I know people do it. Just don't see it realistic in this situation.
J295 wrote: Thu Nov 12, 2020 6:24 am I didn’t try to evaluate the financial aspect, but the substance of the decision makes sense to me. For some of us, a tranquil home environment is a great gift that you like to preserve if you’re able
Good to hear all views, supportive or not. Thanks.
hudson wrote: Thu Nov 12, 2020 6:31 am Cruise,
Great reply...probably in the top 10 all time!
Thanks. I have a reputation to uphold and improve upon. The burden is a heavy one :).
JoeRetire wrote: Thu Nov 12, 2020 6:59 am
Cruise wrote: Wed Nov 11, 2020 7:37 pmThe purchase of the home next door would be accomplished by taking a mortgage in an amount that would be about 10% of our net worth.
You plan to get a mortgage on the house next door? Then tear it down? Check with your mortgage company about that plan first. Many would not allow it, since your loan would be secured by the new house.

Also, check in with your town to see if you would be permitted to keep the empty lot as a separately salable housing unit into the future. Zoning laws might not permit that.
So, the annual cost of the mortgage and property taxes on this vacant land would be about 18% of our annual income.
That's a lot of money to spend on an empty lot.

If it was me, I'd wait to see what actually happens down the road. If the new owners/occupants made it unbearable, I'd just move and find a home I could enjoy for the long term.
Thank you for your reply. The mortgage would be taken out on our existing home. Empty lots are salable in our community. It is a lot of money. Wait and see might bring relief or nightmare...
FoolMeOnce wrote: Thu Nov 12, 2020 7:50 am Have you considered purchasing the house and not tearing it down? If you think you might move in a year or two, why bother? Just leave it vacant (with whatever precautions are necessary re: utilities, safety, etc) and let the next purchaser decide whether to tear down or keep it. This also expands the future market of potential buyers. Consider how much the value might decrease in a short time period and decide if that cost (and transaction costs, interest, tax, etc) is worth the quietude. Plus the chance that the loss is smaller or nonexistent.
Thank you. This might be the best possible option: No stress and costs of a rebuild.
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Cruise
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Re: Should I Purchase My Neighbor's Home?

Post by Cruise »

Cruise wrote: Thu Nov 12, 2020 4:52 pm
000 wrote: Wed Nov 11, 2020 9:46 pm
Cruise wrote: Wed Nov 11, 2020 9:42 pm How do you think this purchase would make our lives even more complicated?
More debt, more insurance, more property taxes, another lot to sell when you move. Possibly difficulty or higher rates getting the insurer to insure a vacant lot. Depending on how big these lots are, possibly trespassers coming on the land out of sight from your house.
Good points, thanks. The land is not that big, so we would know if trespassers around.
BFR wrote: Wed Nov 11, 2020 9:55 pm One thing to note - when you try to sell a vacant lot, banks are unable to provide financing anywhere as good as compared to a lot with a house on it. Therefore vacant lots can sometimes trade at discounts.
Thanks for that. I've noticed in my community that vacant lots often are marketed with an architectural rendering.
Saving$ wrote: Wed Nov 11, 2020 10:08 pm 1. Have you confirmed the lot is buildable if you demo the existing home? In some areas there are homes on non conforming lots. Existing non conforming is allowed, but once the existing is demo'd, there is sometimes no way to build new and be conforming.
2. Does the house have a basement? If so that will increase your costs of demo as you will need to fill in the basement
3. Does the house have any asbestos or lead paint? This will increase your demo costs.
4. Does your municipality allow you to demo an existing house without permitting a new one? Some do not, as they don't want to lose the property tax on the improvements.

If the above are satisfactorily answered, go for it.
One other thought is that you noted you are considering moving to a condo, where you may have neighbors below and above, in addition to each side. I can't possibly see how construction next door could more objectionable than a bad neighbor at a condo...
Great points--thanks. Should be buildable. No basement. Original house built in 1948, so who knows what is up there. I need to talk to my realtor to find out what are my real options/limitations. Re condo neighbors--yeah, that is a real fear. Our old lady neighbor did not keep up her house, and if we had sold first, it would have decreased our valuation. However, she was so quiet, we have had a peaceful existence here. Unknown neighbors in SFH or condos are of a concern. One of the reasons we have not moved.
Watty wrote: Wed Nov 11, 2020 10:39 pm One risk to keep in mind is that you could own the vacant lot for ten years and find that when you are ready to sell it that it is difficult, expensive, or impossible to get all the permits that you would need to build on that vacant lot. For example I have heard of situations where there was a moratorium on new building permits because the sewer system was at capacity.
...

You could also eventually want to sell it during a bad housing market when few people are looking for lots to build new homes on.
Cruise wrote: Wed Nov 11, 2020 7:37 pm Having both lots available for sale might be attractive to a high-end purchaser as both lots have incredible views. Or, the two lots could be sold independently.
The problem is that just like you any future buyers of your house would assume that they would end up living in a construction zone for a year then have some unknown huge house right next to them. That would make your house undesirable for people people who don't want, or are unable to afford, the vacant lot too.

Just for brainstorming here are some suggestions.

1) You could buy the property then build a modest size house on it that is laid out so that it does not affect your privacy. You could then move it to it, rent it, or sell it.

2) You could see if the person living on the other side of the house would be interested in buying it then you could split the lot so that each of your houses would in effect be on a large lot.
Thanks for your inputs. Your brainstorm #1 was something I've considered, but it further puts us into the RE developer mode, something about which I have no experience. I should talk to my realtor about this.
Saving$ wrote: Wed Nov 11, 2020 10:48 pm OP wants to move to a condo to have one level living and lower maintenance.

Buy the lot and build a one story house. It will be new so maintenance will be less. And you will have fewer neighbors than a condo. Use the proceeds from the sale of your current house after it is all done to hire out routine maintenance of your house next door.
Another good suggestion that we have considered as an option. Certainly constructing a new home will give us an undesired hobby that will last for some time.

An additional expense in all options that involve us moving, is that it would force my wife to retire as she could not handle her demanding position and packing/moving at the same time. Yes, I know people do it. Just don't see it realistic in this situation.
J295 wrote: Thu Nov 12, 2020 6:24 am I didn’t try to evaluate the financial aspect, but the substance of the decision makes sense to me. For some of us, a tranquil home environment is a great gift that you like to preserve if you’re able
Good to hear all views, supportive or not. Thanks.
hudson wrote: Thu Nov 12, 2020 6:31 am Cruise,
Great reply...probably in the top 10 all time!
Thanks. I have a reputation to uphold and improve upon. The burden is a heavy one :).
JoeRetire wrote: Thu Nov 12, 2020 6:59 am
Cruise wrote: Wed Nov 11, 2020 7:37 pmThe purchase of the home next door would be accomplished by taking a mortgage in an amount that would be about 10% of our net worth.
You plan to get a mortgage on the house next door? Then tear it down? Check with your mortgage company about that plan first. Many would not allow it, since your loan would be secured by the new house.

Also, check in with your town to see if you would be permitted to keep the empty lot as a separately salable housing unit into the future. Zoning laws might not permit that.
So, the annual cost of the mortgage and property taxes on this vacant land would be about 18% of our annual income.
That's a lot of money to spend on an empty lot.

If it was me, I'd wait to see what actually happens down the road. If the new owners/occupants made it unbearable, I'd just move and find a home I could enjoy for the long term.
Thank you for your reply. The mortgage would be taken out on our existing home. Empty lots are salable in our community. It is a lot of money. Wait and see might bring relief or nightmare...
FoolMeOnce wrote: Thu Nov 12, 2020 7:50 am Have you considered purchasing the house and not tearing it down? If you think you might move in a year or two, why bother? Just leave it vacant (with whatever precautions are necessary re: utilities, safety, etc) and let the next purchaser decide whether to tear down or keep it. This also expands the future market of potential buyers. Consider how much the value might decrease in a short time period and decide if that cost (and transaction costs, interest, tax, etc) is worth the quietude. Plus the chance that the loss is smaller or nonexistent.
Thank you. This might be the best possible option: No stress and costs of a rebuild.
Topic Author
Cruise
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Re: Should I Purchase My Neighbor's Home?

Post by Cruise »

TomatoTomahto wrote: Thu Nov 12, 2020 8:05 am
J295 wrote: Thu Nov 12, 2020 6:24 am I didn’t try to evaluate the financial aspect, but the substance of the decision makes sense to me. For some of us, a tranquil home environment is a great gift that you like to preserve if you’re able
+1.

I lived next to a tear down and subsequent construction of a McMansion. Not again if I can avoid it.
The voice of experience. Thank you.
egrets wrote: Thu Nov 12, 2020 8:21 am I haven't read all the replies, but I would do it. It is horrible living next to someone building and then living in a McMansion. You can have the ground leveled and planted with lawn so it is not a weedy mess. You would even have room for a nice garden, vegetable or decorative. Keep the lots legally separate so you have options in terms of selling.
Thanks for your suggestions.
barnaclebob wrote: Thu Nov 12, 2020 8:30 am I certainly wouldn't blame you for doing this. You are trading one type of asset for another + having more control over your life. Control over your life is worth a whole lot. (heyo!)

The house in front of ours just might be a teardown one day and it might be possible to build a slightly taller house which would cut into but likely not eliminate our view. I absolutely love my house and have had similar thoughts as you. Buying their house when the time comes would allow me to trim some trees and further improve my views. What I have going for me is that their house is waterfront and doing anything construction related within a certain distance of the waterfront is nearly impossible. The lot is also on the small side so it wouldn't be possible to put a McMansion on it.
Love our view lot. Love our peace and quiet. Thank you and good luck in your situation.
galawdawg wrote: Thu Nov 12, 2020 8:34 am While I love the tranquility of living on our small farm on acreage, that sounds like a very significant amount of money to spend and put at risk to forestall what is at this point only a possibility of some negatives for a few years between now and when you and your wife are fully retired and likely to again seriously contemplate moving.

Here are a few specific thoughts:
  • At this point, you don't know what will happen to your neighbor's property. It may not sell for months. A purchaser may purchase it and live in it or otherwise leave the property as is. If it is purchased as a tear-down, construction may not begin for months or longer.
  • If a new house is built next door, putting up a temporary chain link fence along the property line and a silt fence at the base will prevent incursion of persons, construction material and equipment, and soil. Construction itself is likely to last less than a year (and perhaps much less than that) so the duration of such an inconvenience will be limited.
  • If a new house is built next door, it may result in an increase in neighborhood property values and benefit to you when you sell your home.
  • If you purchase the house next door, you will incur ongoing expenses, such as taxes, maintenance and such. If you tear it down, you will incur substantial cost in demolition and proper removal of all debris. You may still be required by your local government or HOA to maintain the vacant lot. If you don't tear it down, you will still need to do some maintenance and upkeep and will need to take steps to keep the vacant house from becoming an attractive nuisance and drawing vagrants, squatters or others who could vandalize the property or worse.
  • If you purchase the house next door, that is one additional property for you to sell when you do move. You may find it difficult to sell, you may not recoup your investment and you will incur transaction costs.
  • The hassle factors of owning and eventually selling the property next door may far outweigh the hassle factors of possible construction of a new home for a limited period of time.
If you were going to remain in your current home for many years, I'd say absolutely. But considering that you may decide to relocate within the next few years, I'm not sure that the negatives of a purchase outweigh the possible negatives of not purchasing to the extent that it is worth the significant investment of time and money.

Good luck in whatever you decide!
Thanks for your detailed analysis. Unfortunately, the way our lots are configured and the prevailing winds, there is no way any fence will prevent debris from affecting us.
gr7070 wrote: Thu Nov 12, 2020 8:48 am It appears I'm in the minority who find your concerns rather trivial. Dust outdoors? Humans of various ages living next door? Gasp.

I can't fathom doing this, especially with a tear down for only two?! years worth of "tranquility". Note the tear down will have some of the same concerns you have with construction, just a shorter duration.

Meh.

You're going to move soonish. Step that up if you really hate the situation.
Thanks for your input.
FoolMeOnce wrote: Thu Nov 12, 2020 9:08 am
Depending on local rules, you could purchase, add a height restriction to the property, and resell.
Thank you. The idea of adding a restriction to the property once purchased is very interesting. Theoretically, I could keep the home further away from us, limit the square footage, and tinker with other things??
Topic Author
Cruise
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Re: Should I Purchase My Neighbor's Home?

Post by Cruise »

aristotelian wrote: Thu Nov 12, 2020 9:37 am How about going on vacation during the construction?

This obviously makes zero financial sense but you do not need Boglehead approval for lifestyle choices. Seems like a huge waste of capital but go for it if it makes you happy.
Right now, a vacation would be ideal! Thank you.
IowaFarmBoy wrote: Thu Nov 12, 2020 2:02 pm I don't think this question has been asked- How much will the value of the property decrease if you tear the house down? Or asking in another way, how much of the purchase price is the land vs the structure? For example, if you pay $150k and the lot is worth $120k, it feels a lot different to me than if you pay $150k and the lot is only worth $50k. The value of what I am tearing down is especially a factor if you are only there for a few years.
Thank you. The assessed value of the land is 7X that of the improvements. The house is really a tear-down.
veindoc wrote: Thu Nov 12, 2020 2:13 pm I think you have more time than you think. If the house is a dump it may take time to sell. And if the buyer is likely to tear it down then there are architectural plans to be drawn, permits to be obtained etc. I’m sure none of those things will be done quickly in the time of Covid. I think you have a year, probably more. In that time I would be looking to move as you already stated you had planned to do.
Thank you for that analysis. Perhaps the COVID environment would improve by that time and we would feel more comfortable moving into a condo.
N1CKV wrote: Thu Nov 12, 2020 2:43 pm I do not feel these two statements are consistent:
Cruise wrote: Wed Nov 11, 2020 7:37 pm Her home is very old and it is highly likely that the next purchaser will tear it down and rebuild. If torn down, or even renovated, the hassle in our lives will dramatically increase: There will be construction noise and dust literally a few yards from us, and our shared driveway will be a big hassle to keep clear of construction vehicles so we can ingress and egress.
Cruise wrote: Wed Nov 11, 2020 7:37 pm We don't know how long it will be until we decide to move, but pre-COVID, we were starting to look into moving into a condo for single-floor living and not having to be responsible for exterior upkeep.
In one you are worried about noise from new neighbors in close proximity, in another you are wanting to move to a place that shares walls with neighbors. The construction part is a non-starter, it takes what? 6 months? That is livable IF it even happens in the first place.
Thank you. You hit the nail on the head. We want a perfect world with only quiet neighbors and no other disturbances. :)
jdb wrote: Thu Nov 12, 2020 4:15 pm Been there done that. Our neighbors old house immediately behind us, we bought and tore it down to prevent McMansion being built. Best real estate investment, other than our house, we have ever done. We live in South Florida, planted tropical fruit trees and trees and shrubs for birds, a butterfly garden, put in nice lawn, started apiary with honeybees, my winter tomato crop in the back looking great, now have a full acre extra in back yard for us and friends and family (and the birds and honeybees and butterflies) to enjoy. Yes, taxes on the empty lot are high. But we kept it in a separate ownership so in future will be able to sell as a separate lot, and it increases in value every year by much more than taxes. Though we will never sell until sell our main house. So my advice is if you can afford it go for it. Good luck.
Thank you. Good to know it worked for you.
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AerialWombat
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Re: Should I Purchase My Neighbor's Home?

Post by AerialWombat »

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This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
Saving$
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Re: Should I Purchase My Neighbor's Home?

Post by Saving$ »

Cruise wrote: Thu Nov 12, 2020 4:52 pm
Saving$ wrote: Wed Nov 11, 2020 10:48 pm OP wants to move to a condo to have one level living and lower maintenance.

Buy the lot and build a one story house. It will be new so maintenance will be less. And you will have fewer neighbors than a condo. Use the proceeds from the sale of your current house after it is all done to hire out routine maintenance of your house next door.
Another good suggestion that we have considered as an option. Certainly constructing a new home will give us an undesired hobby that will last for some time.

An additional expense in all options that involve us moving, is that it would force my wife to retire as she could not handle her demanding position and packing/moving at the same time. Yes, I know people do it. Just don't see it realistic in this situation.
You stated you are semi retired, so you manage the contractor in a way that DOES NOT take any extra of wife's time. You agree on the big picture and she lets you decide on the details.

It will take at least a year to buy the land, demo the house, design a new one and build the new one. Then the new house is next door to you so you move slowly so that wife does not have to quit job. If she insists, it is no different than if you moved to a condo, which you say you would do after the pandemic. The year to get a new house is probably longer than it will be before we all get vaccines and put this quarantine business behind us.
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Cruise
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Re: Should I Purchase My Neighbor's Home?

Post by Cruise »

Saving$ wrote: Thu Nov 12, 2020 7:46 pm
Cruise wrote: Thu Nov 12, 2020 4:52 pm
Saving$ wrote: Wed Nov 11, 2020 10:48 pm OP wants to move to a condo to have one level living and lower maintenance.

Buy the lot and build a one story house. It will be new so maintenance will be less. And you will have fewer neighbors than a condo. Use the proceeds from the sale of your current house after it is all done to hire out routine maintenance of your house next door.
Another good suggestion that we have considered as an option. Certainly constructing a new home will give us an undesired hobby that will last for some time.

An additional expense in all options that involve us moving, is that it would force my wife to retire as she could not handle her demanding position and packing/moving at the same time. Yes, I know people do it. Just don't see it realistic in this situation.
You stated you are semi retired, so you manage the contractor in a way that DOES NOT take any extra of wife's time. You agree on the big picture and she lets you decide on the details.

It will take at least a year to buy the land, demo the house, design a new one and build the new one. Then the new house is next door to you so you move slowly so that wife does not have to quit job. If she insists, it is no different than if you moved to a condo, which you say you would do after the pandemic. The year to get a new house is probably longer than it will be before we all get vaccines and put this quarantine business behind us.
Thanks for the brainstorm scenario. Lots to think about!
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Cruise
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Re: Should I Purchase My Neighbor's Home?

Post by Cruise »

OP here. Thanks for all the great ideas expressed by the community. We are meeting with our realtor and accountant over the next few days, and everyone's inputs have been invaluable in setting the stage for these meetings.

The biggest factor probably in play is whether we have the nerve to put 1/6 of our net worth into the purchase, along with whatever other expenses (money and human capital) would be involved in a tear-down/remodel/rebuild situation.
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