The Reality of Buying a Vacant Lot

It’s a common misconception that buying a vacant lot is a less expensive way to achieve the dream of homeownership. Unfortunately, the math rarely works out that way.

Lots that are priced attractively are typically discounted for a significant, often hidden, reason. For example, in the Orinda or Berkeley Hills, lots under $200,000 are often unbuildable. They may lack a sewer line and be unsuitable for septic installation due to size or terrain. These lots are only viable for ‘land banking’—holding the property for a potential sewer installation decades in the future. Building or placing a camper is not an option.

The True Cost of Infrastructure

The price of a lot is just the beginning. Other attractively priced properties require significant infrastructure investment before a house can be built. This may include costly slide repair, retaining walls, or extensive excavation.

Furthermore, building a new structure where none existed before means incurring all new utility costs. While you may opt out of natural gas, you must connect to electrical, water, and sewer. It is prudent to budget in excess of $100,000 for connection and meter costs, which can also involve many months of approval and installation time.

Finally, the planning and permit process is a major factor. Without approved plans, anticipate a timeline of 9 months to a year to get them, along with costs ranging from $50,000 to $100,000.

A More Efficient Path: The Remodel Advantage

In our experience, the people most able to successfully build a custom home are those who already own property and have the time and capital to manage a multi-year construction process.

For those looking for a custom home solution, we often recommend buying an existing home that needs work and focusing on functional improvements and expansions. An older home that will be remodeled offers compelling advantages:

• Easier Planning: Remodeling approvals are generally faster and less expensive, particularly if the design avoids complex review requirements.

• Utilities In Place: You save the substantial cost and lengthy hassle of installing all new meters and connection charges.

• Guaranteed Buildability: An existing home proves the lot is generally flat or already prepared for a structure.

Ultimately, many clients find that a condo or townhome serves as a good interim solution, or that moving to a more outlying area provides the best balance of house and yard for their budget.

If you’re looking to explore your home options and want an experienced agent to help you navigate the financial and regulatory complexities of the market, give us a call at 925-200-6000.