To buy or not to buy - that is the start of my question

November 24, 2010 6:44 AM

Should I buy land with a tear-down house given my special snowflake details?

My husband and I live on a .25 acre lot in a coastal neighborhood in Maine. A .5 acre lot directly adjacent to ours (through our backyard) came up for sale last week after over 5 years of vacancy since the owner's death. We had discussed wanting to own the property in an off-hand way for the last couple of years and had taken advantage of its empty state to cut through with our dogs when returning from walks around the block. When it went up for sale, we called the realtor immediately, took a tour, and made an offer. There were several other interested parties. Our offer has been accepted and we are currently in the due diligence phase.

There is a garage with a semi-finished apartment and a house on this property. The house is absolutely, unequivocally a tear-down. The garage is structurally sound and worth keeping (at least to us) for the time being. We would likely wait a few years and then build a small house to either rent or sell, depending on the market.

The difficulty I'm having is in how we are paying for this property. My father passed away a few months ago, and we'd be using a large chunk of the inheritance I received to purchase the land. Because the house is a tear-down, the price was determined based on the value of the land and financing is not a viable option. We can pay cash, because we have the cash from the inheritance.

It is very likely a no-lose scenario - even if we just tore the house down and sat on the land, we'd likely get our money back. But I am having a difficult time parting with the inheritance money, for purely emotional reasons.

Can some savvy Me-Fites share stories of similar purchases that went well? Or address my emotional response without attacking me too much for it? I am basically looking for arguments for or against paying cash for what is essentially just land (tear-down costs are minimal) in the current market. We don't have any other major debt (other than my student loans) and don't have any immediate need for the money otherwise.

posted by anonymous to Work & Money (14 answers total)

In my case, it helped to think about the individual who bequeathed me the money and what he wanted for my life. My benefactor valued financial security, enjoying life and socializing with friends and families, especially hosting big gatherings. All of that enabled me justify using the funds to expand our home building plans with a screened-in porch, especially since I had memories of my relative sitting on his, drink in hand. We love sitting out there in temperate weather and refer to it as the [Carmicha's Benefactor] Memorial Porch to the point where we have considered getting a little plaque.
posted by carmicha at 6:55 AM on November 24, 2010

I think the way to deal with the emotional hesitance to use the inheritance is to use it responsibly. It sounds like you're fairly confident that the property is a good investment, so that's not an issue (unless you're wrong about it being a good investment). But what about those student loans? Could you get a mortgage at a lower interest rate than you're paying on the student loans? If you could, then it will probably make more sense to pay off the student loans before paying cash for the property.
posted by jon1270 at 6:55 AM on November 24, 2010

But I am having a difficult time parting with the inheritance money, for purely emotional reasons.

If your father were alive today and had that kind of money to give you, he would probably be happy to see you do something with it like what you're proposing if it would make your life better. A sound investment in real estate is the kind of thing a father likes to see his kid make.
posted by pracowity at 6:57 AM on November 24, 2010 [8 favorites]

In the current market, I would assume you are getting a reasonable price on the land. So that should work to your advantage unless you were planning on selling either or both parcels in the short run. If you can enjoy some use of it in the short run and envision being able to, at the very least, recoup your costs in the long run through rental or sale, I personally think it's a fine opportunity. We've got a vacation home next to a future tear-down, and I'd buy that parcel in a heartbeat if it were up for sale.

I think the only circumstance where it wouldn't make sense to proceed would be if you are not on track with retirement savings, in which case your inheritance might be best spent shoring that up, or you don't have an adequate emergency fund (the size of which would depend on your personal situation in terms of job stability "in today's economy", etc.)

And personally, as a parent, I'd be delighted if my future bequest goes toward something as "rooted" and enduring as land or property.
posted by SomeTrickPony at 6:59 AM on November 24, 2010

Or address my emotional response without attacking me too much for it?

You're not spending the inheritance on liquor and slots at Foxwoods, you're buying property that you can use and love for the rest of your life. I can't think of too many better ways to honor a loved one than buying coastal property in Maine.
posted by bondcliff at 7:00 AM on November 24, 2010 [9 favorites]

The money is a tangible link to Dad, and it must be hard to part with any link to him. Put a bench on the property and use it to sit and remember him, or create some other tangible memorial to him, probably not in a tombstone-ish way. Did he especially like a particular tree or flower? Plant some there.
posted by theora55 at 7:01 AM on November 24, 2010 [6 favorites]

Another way to look at this is that there might be a possibility that you existing property could be worth significantly more because the lot size would be vastly increased. A (very rich) neighbor on the street behind mine bought two properties on my street that backed up to his which did increase his property value tremendously because there are very few properties near downtown Austin with that much land.

As for the emotional thing...assuming it is not a bad investment, I think it is great you are using the money you inherited from your dad this way. Theora55's suggestions of a bench or or special plantings is great. Is your concern that the money is not liquid? If so, it sounds like you would be able to sell the land in the future (since there were many people interested) and make it liquid again--again assuming you are not paying too much.
posted by murrey at 7:22 AM on November 24, 2010

It's important to remember that money is not a "thing," so it's not like your father left you something that you are now giving away. What your father left you was a possibility, an idea. You are taking that possibility and turning it into something tangible and good for your life.
I know my parents hate it when they give me money for my birthday and I put it in savings. They would much rather I take it and go do something fun with it and turn it into a real gift. That is what you would be doing here, making this nebulous thing into a real gift.
It is scary to commit to one thing, when the money can represent so many different things, but you have chosen a good one and it will make you happy and bring you more money and more possibilities later.
posted by rmless at 7:37 AM on November 24, 2010

Your father's money is not your Father. It doesn't equal him, it doesn't contain him, it doesn't bind or restrict him or vice versa. You sound like you had a fantastic relationship with him, which is awesome---and certainly you know that he would want you to be happy and certainly better off with what he has left you. Land, especially land with value, is a great way to invest in yourself and the future of your family.

You aren't going to, and you don't want to---remember you father for his money. You are going to, and you do want to, remember him for who he was and the gifts he gave over your life and his. Buy the land, and niche out a space that's just as he would have wanted. A cozy chair, a bench by the shore---something you both loved, and connect with him and your memories there.

From my perspective, connecting with his gift through time and place is way more emotionally satisfying (and, somehow, honorable) than letting it sit in some account, maybe growing interest, maybe not.
posted by TomMelee at 7:46 AM on November 24, 2010

Someone I know inherited money when her mother died last year. She used it to pay off her mortgage. She says every single day when she looks around her house she thinks about how her mother made it possible for her to enjoy the security and freedom of owning her own home and says "Thank you, Mum," to herself. This property sounds like a good investment and by using what was your father's money to buy it, you'll forever link your father's memory and the property in your mind, and think of him as you use and enjoy the land. This is a good thing, really!
posted by orange swan at 7:59 AM on November 24, 2010

You're not "parting with" the money, you're moving it from one investment (the bank?) to another (property).

You wouldn't feel this way if you were moving it from a money market account to a CD, why feel that way now?
posted by HuronBob at 8:07 AM on November 24, 2010 [3 favorites]

Look at it this way: when your kids are grown, you'll have a second buildable lot for a guesthouse or cottage, and if you have more than one then you can leave them each a buildable lot. Isn't that the kind of thing your Dad would have wanted?
posted by nicwolff at 8:19 AM on November 24, 2010

WARNING: before you do anything check the local zoning and or building ordinances. You may not be able to build as big as you think. Check setbacks and septic rules.
posted by Gungho at 9:04 AM on November 24, 2010

Your discomfort would make more "sense" if you were talking about a pure investment property, but you're not. Your father's money will go into your home. It'll enrich your life and your family directly. I'm sure your father would approve of that heartily. And if you think spending the money will mean that a part of your father is now gone, then remember that he's not gone--he's now part of the land on which your home sits, on which your dogs play, on which you'll walk almost every day. Buying the land with his money (i.e., your father buying the land for you) brings him closer to you.
posted by fatbird at 9:49 AM on November 24, 2010