As you may have guessed my answer is it depends. Are you going to build right away are you holding for long term investment, or do you plan on flipping in less than three years?

If you can afford to pay cash than by all means do so, this will allow you to have no monthly debt and when financing a construction loan no additional money will be required to build your house. The bank will generally finance 80% of the completed projects appraised value, so if you paid $100,000.00 for the lot and you need $400,000.00 for your new home and the appraisal comes in at $500,000.00 (80%) you’ll have the $400,000.00 for the rest of the project. Also mortgage interest on raw land is not tax deductible, but once there is a structure on the property a number of tax savings are available.

The long term hold plan is much the same, since there is no write off created by the raw land and the interest can quickly double your cost of ownership this would be a pay once and hold plan.

The flip only works when the market forces make for quick gains. For example getting in on a new subdivision when the developer needs to cover road costs early on, but plans to raise prices in future phases. If, you bought at 100,000.00 financed with 20% down and paid 8% interest then sold at the end of one year for $160,000.00 you would have spent $20,000.00 (down payment) $8,000.00 (interest) and say $2,000.00 (legal & closing costs) you would have spent $30,000.00 to make $60,000.00 100% profit. Same case paying cash for the property $100,000.00 down $0 interest plus $2,000.00 closing costs spent $102,000.00 to make $60,000.00 nice return at 58%. But in 7.5 years of paying interest this would be break even at best.

Let Alpine Lakes Real Estate help you with your plans.