Just bought some land to build a future home

Most of my blog entries on this site are not very personal, but this one is all about me. It’s related to finances of course so it still fits into the site. It’s one of those situations where I’m not 100% convinced that I did the right move but from most viewpoints it seems financially logically to me. Let me give you the rundown and let you decide.

Background information: My wife and I have always wanted to own about 1 acre of land to build our home, but with living in the “city” land doesn’t come at a cheap price. We live in Kentucky so the cost of living is low compared to major cities such as New York, LA, and San Francisco, but for an acre of land here you’ll pay about $100,000. With that said we purchased our first home just before we were married about 6 years ago, a starter home for about $112,000. Two years later we sold that home for a profit and purchased a slightly bigger home in a little nicer neighborhood for about $150,000. Two years later we sold that home for a little profit and buit our current home for just over $200,000. The only problem is that it sets on less than .125 acres of land, not much of a yard for a backwoods Kentucky boy.

We started looking around for some land to build another home in the futre and found the perfect plot of land just a few minutes from our current home. Only problem…. it was listed at $80,000 for 1 acre, not a bad deal for the area but still out of our price range with already owning a home. We talked to the selling realtor but pretty much wrote off the land.

About a week later the realtor called us back and said they had dropped the price of the land $10,000 and told us the land was a forclosed property owned by a bank that was struggling. He suggested we make an offer on the land for what we could afford and see what happens. Remember the land was still listed at $70,000 but we sent him off with an offer for $54,000. The next day the realtor called us and told us our offer had been accepted! The land is appraised at $92,000 so I know we got a great deal, but I’m still not 100% sure we did the right financial move.

We recently paid off a car freeing up $400 per month, about what the payment on the land will cost us, but should we have used that extra $400 per month to pay off our mini van we just purchased a few months ago? Or did we do the right move by buying this land at a big discount and having almost $40,000 in a piece of property that we just bought? My financial instinct tells me it was a great investment, but in the back of my head I hear Dave Ramsey saying we should have passed, any thoughts????