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Episode-3- The Pros and Cons of Buying Raw Land for a Homestead

Episode-3- The Pros and Cons of Buying Raw Land for a Homestead

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Beau
And today we are talking about raw land. My wife Kelly loves raw land.

Kelly
I think I have a land purchasing addiction, but I don’t get to feed it. So that’s the problem of addiction. As soon as we bought the property I wanted to purchase all the properties and all the deals.  And now four years later I have the one property and the one deal.

Beau

So are you going to let me learn how to do wholesale land buys?

Kelly

I feel like we should just figure out how to take care of chickens first.

Beau

We should. That’s probably a better idea.

Speaker 1: (04:31)

My favorite type of list is pros and cons. I know I really do like pros and cons to a spreadsheet. I am like Jim on The Office whenever he and Michael were co managers and they were trying to solve a problem and he, Jim wanted to do a pros and cons lists. So you guys know that we purchased our property totally raw, like when we were finding it, there was no septic, no electric, no water, no Nada.  It was just straight up land. There wasn’t even a road. There wasn’t a driveway up onto the property. Yes.

Kelly

Oh Gosh. It’s been so long.

Beau
So this is our perspective is actual raw land owners and how we purchased it and what we would do differently.

Kelly

Yes. I have a feeling like as we talk, we’re going to have more cons than pros that are just completely off script of our outline here, but if you’re in the position of purchasing your first property and thinking, oh yeah, like if you’re wide eyed dreamer and you think, yes, I can make all the things happen. You are the Willy Wonka of raw land design. Maybe this will shed some light on it for you. Here’s some good things that we really liked about purchasing our property and figuring out where things would go, what they would look like and what function they would serve. So the best thing about the raw land is that it is a blank canvas.  You can decide exactly where your home goes, what the garden looks like. And the cool thing about it is there’s usually nothing around you because other people, if you’re in an area like ours, purchased raw land as well. So they’ve also made it their own and there’s just no cookie cutter in that. I think that’s really appealing to have neighbors who are doing their own thing and when you drive down your road, it’s not going to look like everybody else’s.
Beau
Like our neighbor with all the stuff in the front yard?

Kelly
You know when you get outside of an Home Owners Association, you just got to shift those expectations for what your neighbors yards are going to look like.

Beau
Our neighbor has a  jurassic park jeep parked in front of their house and they haven’t driven it in six years.

Kelly
I think there’s things growing over it.

Beau

Oh yea, it’s awesome. So you can make it exactly what you want. That could be its own pro and con in there. It takes a little while in order to think about what you want. But you know for us we were able to look at the sun exposure and we have our shed to houses, it’s a long shed so it’s 16 by 48 so we were able to run it on the 48th side. We are able to run it in the long side by facing south. So we were able to kind of take a little bit of sun exposure opportunities with that. You definitely wouldn’t want to run a very long shotgun style house like that to where one side of your house is facing west because that would just make it in the entire house incredibly hot.

Kelly

I think this too, a lot of properties that we looked at had homes just in like a picturesque position on the property. So it wasn’t necessarily designed for the way the property would flow water or the elevation of it. It was a lot of properties are just designed with this house at the top so that it has a great view and not necessarily paying attention to the efficiency of the house. That was a huge bonus for us to be able to design it like you’re saying.  So that when the sun is up, we’re not getting the hottest part of the sun at the time. We’re cooking in the middle of the day or at nighttime, it’s just not over our kitchen. So that’s a big benefit for us, especially here in Texas and something else I love about it. Our house has a huge porch on the front and back side of the House that keeps our house really cool.  It’s like we have 10 to 12 feet of almost insulated space where we’re not catching the sun through the windows and that really cools our house as well. It is a big pro and it may seem small, but if you’ve never built like us, this was a big get for us to have a victory in this very small way, but making a design that actually worked was beautiful for us because it’s stressful enough to live in an unfinished house while you’re finishing it. Now we’re in the thick of summer in Texas and we see that design actually worked.

Beau

And with this you can build it your own. You can also go slow in building it your own, which means that you can observe the land and really just make sure that you’re not going to make type one errors, which is basically an error that you can’t ever undo. Like where we put our septic system, if that’s the wrong place, that as a type one error.  Type one error is a mountain. You’re not going to change a mountain or you’re not going to change the government. There was this one guy who many, y’all know of him, Nick Ferguson, I think he talked about an older like in a general multigenerational family home that he was living in and in this one spot they created this house like this v shaped porch and that v shaped porch. The opening of the V faces uphill, which means that when it rains it creates just a pond, a lake right at their doorway. And so that is very apparent that the people that started building the house, they really, they just did it. They didn’t, they didn’t observe what is going to happen with the water whenever it rains. So you can go, you can build it the way you want, you can go slow and you can eliminate any kind of errors. Cause like us, we, we just have the house right now and you know, we’re able to really go slow of where we’re going to put our next building. Either another, either an external storage shed or a barn or something like that. We can really go slow and make it put it exactly where it needs to be. Besides where you want to put your buildings, you can place in very specific, well thought out spots, your electric lines and your waterlines and your septic. So if you just are locked into having these things underground and you want to do some kind of fancy earthworks or something, you’re kind of stuck. You can’t do much being, if you have underground electric and water and septic, those things, they’re not going to change that. So by being able to put those utilities in the spot where you want them,

Speaker 1: (11:36)

then let me ask you this. What about searching for that property? Because you can’t just observe all the properties that you’re looking at before you purchase it, but how do you make the best choice to actually purchase raw property?

Speaker 4: (11:49)

Well, that will be on another podcast of a property purchase checklist, but basically you kind of do the same thing for us. What we needed to do is hire an expert. So we hired Pete Van Dyke of drought proof Texas and that was the best thing that we were able to do because whenever he saw it, he could visualize with his experience everything that we could do with the property and he wants even said for our property that this was his favorite piece of property that he has ever worked on because of just, it’s just a really neat little space. It has a LE, it has some gentle slope to where you can move water from one part of the property to the other. We’ll go with that. Another podcast episode of how you actually purchase land and the things that you make sure that you want to do on the hint water is a huge one.

Speaker 4: (12:39)

Okay. The second pro for buying raw land is that you can usually get that piece of property cheaper, cheaper than if you have a building in a pond, an established property. Yeah. Yeah. Cheaper than that and cheaper with taxes. So you of course you get what you pay for a be leery of, you know, 40 acres for $1,000 in west Texas. That’s not good property people. Yeah, that’s really bad. Yes. That’s really a fast one as you can of course it makes sense. You can buy it cheaper. The third one is going to be that you can more easily build your homestead with cash. If there’s already a house and an outbuilding and a couple of sheds and a chicken coop and on an already, you know, established pawn there. Most of the people in America are going to need to get a mortgage for that.

Speaker 4: (13:35)

You’re not just going to go drop 200 to $400,000 in cash. Some of you might and that’s awesome. It’s a pro with getting raw land because you can save up money in order to do that. So for us, probably I would say 80% of this all has been in cash and then by the end of this year we will be able to pay off all of the debt in regarding our kitchen because we made our kitchen awesome. We love it and we did a Bridgeland for that. So we’re able to really emphasizing how much he loves the kitchen because you are totally like, okay Kelly, you got whatever kitchen you want. Even if it makes us take out a little bit of debt. Well, uh, because we had raw land, we were able to pay for it for a couple of years before we actually moved there. We were able to go slower to by selling our house. The thing with us. So in terms of our kitchen, we, we were able to live in this space for a couple of months before we were able to get some of these nicer amenities in our house. Well, but I think this too, someone said start with what you got. Just go cheap and make it happen and then get fancy later. And I think we’ve been able to do that because it gave us the things you just talked about. It us time to figure

Speaker 1: (14:52)

out really what do we want, where do we want to put it and what function will it serve? And sometimes like you just need something to serve a function of like being beautiful. Like what, two toilets? Yeah. Two toilets is more than, I’m a beautiful function that is function, function, but like a really great shaped couch that is more than just the fancy kids caught that was sitting in that corner. I mean the steps from day one to almost, we are on day probably like 260 now. We’ve really gotten far in a short period of time, but it was step-by-step. So I think buying the property raw gave us freedom to do that without feeling overwhelmed or a lot of urgency to meet contractor deadlines or pull up enough capital to justify moving here. I think that was a lot of freedom for us.

Speaker 4: (15:46)

Now we’re going to go over the cons. I think this will kind of all the things that suck about buying raw property. Oh, okay. So you will always think you only make pros and cons lists so you can get to the cons. You’re like, I’ll get through the pros just because I have to to make people feel good, but I really want to focus on what’s so hard. I think people learn on the what not to do. Yes, it’s easy to be able to hear from Joel Salitan about how to raise pastured poultry for profit. It’s, you can learn a lot of mistakes of what not to do whenever you learn it from Bo Brotherton that’s true. Cause he will screw everything up and no, I’m not gonna do my own research. I got to learn on the job is not true.

Speaker 4: (16:34)

Okay, so let’s go about the cons because no matter how deep we go in these cons of what we have learned and pulled our hair and our teeth out of, we’re building on Raul land, if we had to do it again, I think we would still do it, especially for this property. Now for our second, if we ever move and we do this again, probably not, if we had to do this same thing again, we would do it. But if we did it a second time, I think we would not do Raul. And the number one thing about doing this on Raul land is you will always pay more for your buildings and infrastructure than if it was already there. Not to say that real estate and houses and buildings are going to go down in value like horwill, but you’re just always going to pay more whenever you build it new. When someone takes out a mortgage and puts a house there and then they do outbuildings, you know, especially if they do like ponds and stuff like that, they’re going to pay top dollar, you know, a full retail value for those structures. But then whenever they sell it, they have to sell it for whatever the market brings. You’re just to pay more. And so that’s the bad thing for us having to do that. We’re doing it, you know, slower because we have to pay full retail value for any of these buildings that we want.

Speaker 1: (18:00)

I think that also made our decision process much more intentional than if I just walked into a house and I was like, Oh, I love these floors and Oh, I could, you know, repaint this wall or whatever. I had to prioritize what was most important so that if everything went belly up, we would still not be belly up as a family. Like if we had to get the heck out of dodge because we hated everything about this or anything should happen. Putting in the right things in the right order meant our value for the property would increase and if we had to get out, we would have a fair exchange instead of just like, oh, now we’re going to put in this huge garden and we’re going to take on all these animals. That wouldn’t yield as a profit as quickly as if we had to switch out our living situation. So if something were to go wrong. Right now, because we’ve put in our city electric and water and because we’ve put in a septic tank, we know that every dollar we put in first was going to yield as a profit.

Speaker 4: (19:03)

Totally. Yeah. If whoever’s going to either whether we’re going to stay here forever or not, this property has risen in value 100% for not home. We’re 100% in the value, but for every dollar that we put in for water, electric, and septic, we’re going to get that money back. Right. That’s it. Because no matter what, someone would have to do that and we put it in a very good spot for this property. So we really thought that through is that is a good thing that we were able to do, but too, for example, if we put our house toward the back of the property, it would have cost a lot more to run all of this utilities to the house and someone might not have been willing to pay that price. It’s like an exchange. Yeah, that’s true. Yeah. Something, it adds value to some people and it doesn’t add value to other people. So it definitely lowers your buying. Yeah, I think the word, okay,

Speaker 1: (19:55)

the word is calculated risk or the phrase. Yeah. You know, every dollar you put into your raw land is a calculated risk versus, especially when we looking at like our property value in Katie before we moved, it was like, oh, okay. Or how is this kind of decent, we don’t need to do any real upgrades. And if we did, maybe it would bring us some more on the market. Maybe it wouldn’t. But with this, we know for sure everything we put in at the beginning was going to be a very specific calculated risk and it was like

Speaker 4: (20:26)

only going to be done if it yielded profit in the end. Okay, so the second con is going to be utilities and sewage is crazy expensive. We were just talking about that. Oh my goodness gracious. So that’s the biggest one. I think our septic system was $8,000 so we made that video. I spent

Speaker 1: (20:48)

$30,000 in two months. Yeah, I hope that septic tank was in that. It was okay, good. That was why it was so subject in and out. Well yeah, there was subject and our $11,000 deck. It was a very expensive 60 days and at the moment it’s the jaw dropping thought of holy cow. We really did that and then like the gratitude of thank you lord that we had the finances set up from the sale of our house to be able to put that down in cash.

Speaker 4: (21:22)

You’re going to have to pony up some money for that. One thing I would say. The good thing is if you have raw land, you can choose to put it closer to the road. Hopefully you purchase correctly. Maybe this video, maybe this podcast should go out after property purchase checklists. So, uh, so as you’ve seen, so you probably already listened to the property purchase checklist. Um, I’ll put the episode right here, then you will be able to kind of know that you purchased the right property for things like that. So basically meaning that you can lower your utility costs the closer you put it to the road. And that’s for electric and water. For Septic tank, you can’t, you’re not going to do that. You’re just going to, it’s just so expensive. That’s why some people think, oh, I’m just going to go composting toilet. Good luck if you have children.

Speaker 1: (22:21)

All I’m gonna say is there’s a lot of merit to the off grid lifestyle. And for a while, at the beginning of our channel, people were, were super confused about why we would want water and electric when we could do solar and harvest our own water. And the reality was just this, we wanted to enjoy living here and to do that, those amenities needed to be in place a lot sooner than what we would be willing to wait for to dig a well or something like that. And in honesty, some of those things are very difficult to assess before you move to a property off grid lifestyle. The bulk of people that do it end up get going back on grid. Isn’t that funny? It’s, well, it’s not funny. Maybe. Maybe there’s a bulk of people who do it that you know of like you tubers and podcasters, their off-grid lifestyle is either a vacation, like a space that they can go to to unplug, which also has tons of benefits for like an airbnb rental property. People want to unplug, so that’s awesome. But for a long stint with many children, this was just not even a desire for us off grid.

Speaker 4: (23:35)

For us here in Texas, that was just never an option. There’s some people that do it. I don’t know why. I mean, well actually there’s, there’s, I mean for you who we know and we love, we’re, you know, friends with you guys in our area. Off-Grid is amazing for y’all. And what you said very, you know, many times is we don’t have children. So I’m talking about our neighbors who were Oscar. I see what you’re saying. So for us, off-grid would not work. We needed, he would an AC. It’s just we, we needed

Speaker 1: (24:06)

say more specifically if you’re a family listening to this, don’t feel like you have to go off grid in order to make this successful. And if you’re considering off grade, really weigh out those worst days that you have before you go to that. And in my worst days I considered, oh, what is it like when six people will have this stomach bug or what is it like when we’ve all got to go to the bathroom at the same time? Or what is it like when you haven’t had a hot shower because something cut off. So we just did our best to make living here enjoyable because we really do want to make it the long haul. And if this first year had been hard, um, it would’ve been real easy to quit.

Speaker 4: (24:47)

[inaudible] thanks. We’ve been pretty pretty cake. Honestly. We’re just enjoying the summer and the Nice, coolest [inaudible]

Speaker 1: (24:54)

we’re having a hard count. We are having to figure out schedule and routine though because it’s so tempting to never leave the property. I love it. I love it until I’ve realized like, oh, I haven’t been to the grocery store in a week or oh we haven’t left for anything but church in the last two weeks. I will take all four kids today to Costco so that you can have some time alone. I vote yes. All right. All right. Yeah, you heard it here folks.

Speaker 4: (25:22)

Okay, so the third one is going to be Raleigh and can be harder to get a lender if that’s something that you need. There is no collateral there. So a lender, a mortgage lender is going to know that Raul land is harder to sell than it is if there’s a house on it with utilities already, which is, that’s what lets the, the risk reward that you’re talking about is if you buy raw land just as a investment property, it’s you, there’s a smaller amount of people that you’re going to attract to be able to buy that property. And most likely if you’re buying raw land, you’re trying to get out of the city, which lowers that market for you to be able to sell that as well. So if you need to get a lender for raw land, it’s going to be a little bit tougher for you to get a loan on just the raw land. Probably what they’ll want you to do is to put a big down payment and you know, sign a lot of your life away and they want to see a house be built. Their standard, a very typical house can do a traditional home, not something we’re like a tiny house or a yogurt or a shared the house or anything like that. Something marketable. Yeah, I would say at very least they’re gonna want a barn, a minium type of, you know, metal building structure. I think the con also

Speaker 1: (26:44)

that we haven’t mentioned yet is the emotional purchase. Like the dreamer who sees the raw land and thinks I can do this, that and the other y’all. There’s an entire show dedicated to homestead rescuing because people have gotten such wide eye dreams and then a lax. What we’re going to talk about in the next homestead con on raw land is lacking the skill to make it happen. So that’s the very last con on buying raw land. It’s auto. Let’s go back to the emotional thing because I agree that raw land at a lower price point, you can get quote, I got emotionally attached to this property. Sure. By the grace of God, we lucked out by not buying a bad piece of property. I did a lot of research beforehand and I was able to make sure that this was a decent one. And with Pete, we were able to know that this is a, whether we moved there or not, it was a good investment property no matter what we did.

Speaker 1: (27:50)

But yes, I messed up and I got emotionally attached and I remember throwing my notebook across the room whenever we were trying to figure out if we were going to be able to afford it or not. And we somehow did. Sorry, but getting emotionally attached with raw land. But if you have a house there, that price goes way up and I think it’s probably a little bit hard. I would hope that it’s harder to get emotionally attached to a, a land and a house than just raw land. Cause you think the possibilities are endless on raw land, right? And the finances aren’t. Yes. So that’s important for someone considering raw land. It’s not, I’m not talking to the realtor here, I’m talking about the person who lives in the city or the suburbs or you know, has never, has never been outside of their little piece of Pie.

Speaker 1: (28:43)

And they find this property and they imagine the farmhouse that will be there. They imagine all the animals and how you know the live off the land. And it’s a great idea. But raw means straight up rock guys. I means flavor lists. It means structureless. It means no amenity and anything that you want to enjoy there like roughing it and camping. It is cute but not for life. And especially if you’re in a relationship and you’re too in this thing, this will rub you. It will be the most difficult thing that you have to do. And we had money. So doing it from a position that’s just emotional, it’s easy to get in over your head. So I hate to use this and say that it’s a Downer to buy raw land cause I don’t think that it is. I really think that it just takes the visionary to see it and then it takes the work to put it out on paper, to plan everything that can go wrong, to weigh the risks and the rewards.

Speaker 1: (29:48)

And for us the rewards have been tremendous, but the risks were also very high. And I think in life that’s just how we play. If we’re going to make any risk and expectations. Yeah. Like if we’re going to make a risk, the reward is going to have to be there, but it’s always going to be proportionate. And if it’s small, sometimes it’s not even worth the risk if the reward is small. But if, if the reward is going to be big, we’re usually all in to go after something big. Okay. So as the wife talk about this skill. Yeah. Like that we don’t have it. Yeah. You saw and are seeing. Sure. I think you saw in the beginning in terms of our skillset and what you’re seeing now, whenever we have some comfort as you tubers, even as youtube or is youtube makes you think that you can do anything.

Speaker 1: (30:39)

And then as real life, first Gen homesteaders, we realize we cannot do everything and everything. Not only will take longer, but things just flat out won’t get done unless you have the skill, manpower and time. And I think without those three magical ingredients, energy, even that man, if you have this skill, if you have the energy and the time, like those three together, get the job done without even one of those things, you are set back. I mean we had the energy, we have the time, but no skill on most of these things. Even way back in suburbia when we had our disposal break and you fix the disposal and we’re like victory, we’re going to be the best homesteaders. Then when we’re here we realize even the small things, the systems of how efficient can we become in getting morning chores done. That’s significant in the battle of surviving on your Raul land because it takes a lot of energy and it can become frustrating when you’re not mastering these skills, so bite sized made sense to us.

Speaker 1: (31:49)

If you don’t have the skills, make sure you have the people in your pocket who do maximize that social capital to say, you’re my buddy. I’d love for you to work on this with me. Would you give me a weekend of your time here and plan those out, map them accordingly. Because at the beginning it can be a straight cluster of people who have to come out to fix certain things, to set up for the next contractor to come. And that was challenging to say the least at the beginning of our homestead build. Yeah. I would say most people that are gonna go this route are going to take the tactic of being their own general contract. Right? That is a skill itself. Learning how to frame or do your own plumbing or electric. That is a skill of just being able to organize all of these subcontractors.

Speaker 1: (32:45)

Yeah. And specifically in the right order. Like it’s great to have the names and the numbers and have an idea of when they’re going to come, but they’re all working on their own schedules. And then in some cases like our septic, we’re even subject to weather. So if they can’t dig and the next thing you need to do depends on the septic being installed, then you’ve delayed yourself again. So there are these things that a flexible spirit is important. And then keeping the end game in mind for your raw property, I think is a requirement without keeping that vision right in front of you of where you’re going. You’re going to hit not the first or second pothole along the way, but you’re going to hit the 17th pothole and you’re gonna be like f this, I’m dying because you’re either out of money who you’re out of time or you just can’t take it anymore because it can be really discouraging without knowing how valuable, what the end goal will be.

Speaker 1: (33:44)

How’s it going right now? So we’ve just painted all the pros and cons and we’ve been here for eight months. We’ve been developing raw land for over a year now, intensely over a year. We’ve been developing this property for since 2015 since we bought it. Yeah. So how are we doing? Is the question, how are you doing? I think we’re in a sweet spot right now. I think the infrastructure for the houses there, it makes it livable for our kids. They can do a lot of things. Now the youngest is a little bit older. There is a lot of contribution. I think we’ve come together as a team. So again there’s like this whole unexpected part where you can have a lot of hope but if you’re also not a problem solver then you’re kind of stuck in a Rut when it comes to this. We are definitely a family with lots of hope and we’re used to solving problems like together where our family knows we’re a team.

Speaker 1: (34:39)

We talk about that all the time even when things are going hard and we’re like, dude, are you being part of the team right now? Cause I don’t feel like you’re being part of the team right now. And then celebrating along the way has been helpful. I remember one week when we began, I think we’d been here three or four months and I was like, we just need to go. And in the middle of the day we got out of our house, out of our property and we went to a small town nearby and got coffee and ice cream and it was just like, yeah, we needed to celebrate after months of being in the pit of just keeping our heads down and working really hard. That’s the problem solver in us. So I would say we’re in a sweet spot coming up on a year of living here. A lot of those things on the checklist are done and now it’s onto the fun things that the visionary had in mind at the beginning where it was like, oh, and this is what this spot can look like and this is what we could do here and wouldn’t it be great to have our friends all sitting around here?

Speaker 1: (35:34)

This would be amazing. We could teach people about how to grow this their first time or even things like we’re doing right now on the podcast. There’s actually brain space and time space to do that because we’re not putting out fires, but there are a lot of fires to put out. So it’s nice to be in a sweet spot and see each other and like talk and not just be in the middle of project after project.

Speaker 3: (35:55)

You’re gonna finally see a little bit of a light at the end of the tunnel for the house built and getting some systems done with the animals that we’ll share. But yeah, I feel good. I feel like it’s getting better.

Speaker 1: (36:06)

Yeah, I’d say 10 out of 10 Yay. That’s great. Especially if you’re taking the kids to the store feel really good. Yeah.

Speaker 2: (36:16)

Okay. Okay

Speaker 3: (36:17)

guys, I hope that you enjoy that episode. Please don’t forget to download our income expense report and if you’re in the Texas Austin area, please go ahead and come and check us out on Saturday the 10th and remember guys, we are better together because you are here. So please, we are brand new at this whole podcast thing, so we need you to go and review us on iTunes. That’s the only way the iTunes will know to be able to promote us and help us find more people to be able to listen to this. So please go give us a great review on iTunes and we’ll see you on the next one.

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