Smart Decision – Should I Buy Land and Build Later?

When mapping out your path to the perfect Adirondack residence or vacation property, one of the hardest decisions to make is whether to buy a home now or buy land and build later. Each option comes with its own unique set of pros and cons. Ultimately, your decision will depend on your timeline and financial situation.

While buying an existing home may get you into a property sooner with less logistics, you may have to give up features that were on your wishlist. Custom designing your property layout and structures can be a way to get all the features you desire. However, it comes with a lot of extra steps in planning and executing the design and build out of your dream home.

Below are key things to consider when deciding to buy land and build later vs. buying a move in ready Adirondack home.

4 Key Things To Consider – Should I Buy Land and Build Later?

1. Is It Wise To Secure Your Ideal Property Now?

There is only so much land that can be developed in the Adirondacks. Depending on the location, size of parcel and characteristics you are looking for, properties may be widely available or very slim pickings based on your desired criteria. If you are looking in a tight market with few properties available, it may be wise to jump on a dream property that becomes available now as availability could continue to be limited into the foreseeable future.

Buying now could also save future time and effort. Not having to continue a search for properties within your price range and set up viewings will free you up to move forward on other aspects of your Adirondack home dream. You can put the extra time and effort into designing and planning construction of your new property instead.

2. Can You Take Advantage of Market Pricing?

For those with a longer timeline to reach their Adirondack home goals, buying land now with a flexible plan to build later may be the best option. Depending on the current market, land right now may be widely available for purchase at a lower price point. Even if you are not ready to start developing the property, taking advantage of a lower price to secure the piece of land you want now could work in your favor later.

If you have the ability to buy land and build later, buying now if prices are low could also land you a better return if you change your mind and decide to sell in the future. As the market ebbs and flows with supply and demand, you could take advantage of an increasing price trend to sell and make a nice profit on your investment.

An example of prices changing quickly in the Adirondacks is in the subdivision of Ausable Acres in Jay, NY. Ausable Acres is made up of lots and residential homes situated on approximately 1 acre of land. Lots here sold for between $3,000 – $65,000 in 2019-2020 depending on the property, with the majority of lots selling in the $5,000 – $10,000 range. As of 2024, similar lots are now selling for $18,500 – $85,000 with the majority landing in the $20,000 – $30,000 range.

With this price inflation in mind, if you find the perfect property now and can move forward on purchasing, it may be smart to move forward. Please note that you will likely need to have funds ready for purchase. Many land loan opportunities require a larger down payment and can also have a requirement to develop the property within a certain time period.

3. Do You Understand Construction Loan Terms?

While finding the perfect lot is half the battle when purchasing land in the Adirondacks, the other half involves funding the purchase of the property and its development. A buy land and build later plan typically requires you to have some cash in hand. If you don’t currently have a nest egg set aside to start the building process or you don’t plan to develop the property yourself, taking out a construction loan will be necessary.

Construction loans are different than taking out a traditional mortgage. This type of loan has its own nuances that you should be prepared for:

• Distribution of Funds – While a mortgage gives you a lump sum to pay for a home, construction loans provide more of a funding plan as major milestones are reached throughout the process. Some of these milestones could include foundation then framing and onward. Funding is approved and released as you go, so you will not have all funds available up front to keep the process moving forward.
• Repayment – Many lenders expect you to make interest payments throughout the process based on actual funds used during the construction stage.
• Inspections & Appraisals – Since there is no structure currently built on the property with a buy land and build later plan, lenders will have inspectors and appraisers visit and assess work completed throughout the process. As work is approved, they will release funds to the contractor based on results of the visit. You should expect 4 to 6 inspections to ensure and monitor construction progress.
• Requirements – Similar to a mortgage, there are requirements to meet in order to receive a construction loan. Being financially stable and having the down payment is the main requirement. However, with no structure, the lender will want to see the construction plan and outline of the project before determining your max loan amount.
• Interest Rates – Interest rates are higher for construction loans to fund buy land and build later plans. These loans will have higher interest rates due to void of collateral and higher risk for the bank.

4. Which Construction Loan Is Right For You?

Additionally, construction loans are generally for a term of one year or less with time constraints based on outline and described timeline for developing the buy land and build later property. While these are generally one year loans, there are four different types of loan to choose from based on the situation you would like to pursue.

• Construction To Permanent – This style of loan turns the construction loan into a permanent loan or a mortgage loan. The borrowers will determine if they would like a 15 or 30 year loan at a fixed or variable rate. The borrowers are required to make interest payments based on the drawn funds during the construction phase. However, once it turns into a mortgage, payments on principal and interest are required. Most of the funds turn into a conventional loan, but can also be an FHA construction to permanent or a VA loan if you are a veteran. Finally, this style of loan has a one-time closing, saving you some expenses from other styles.
• Construction Only – This style of loan requires the borrower to repay the loan amount by the date of maturity, typically a year or less. Advantages of this loan provide the borrower with the possibility of securing better terms on their loan. The disadvantage comes if you run into trouble financially. If need to apply for additional fund from a lender, you may not qualify for a mortgage in the amount you need. Additionally, if you do qualify for a mortgage, you could end up with two closings – one with the construction loan and one with the mortgage. This loan is best for financially stable borrowers who have the funds to cover the process.
• Owner-Builder Construction – While this style is less common, it is an option for a borrower is a licensed builder by trade. This loan allows the borrower to also act as the home builder. Most lenders won’t allow this if you are not a licensed builder, largely due to the complexity of construction and building codes that must be met.
• End Loan – An End Loan is similar to the Construction to Permanent loan, but can differ slightly based on the lender once the home has been completed. Depending on the lender, you may end up having two closings instead of the single one with the Construction to Permanent. The closings would fall on the completion of the construction, and then again after the mortgage has been approved to pay for the construction.

While purchasing land may seem like a great idea at first, make sure that you research what current rates and listing opportunities are before trying to move forward. If a buy land and build later path seems like your ideal way to move forward, our experienced forever agents at Adirondack Premier Properties are here to help. Contact us at 518-523-3333 to start exploring available listings today!