Should You Just Buy a Vacant Lot or a House and Lot?
A lot of working professionals aim to invest in property. And why not? Real estate is a solid investment. The value appreciates over time, and you can live in it, sell it, lease it, or pass it on to your children. Once you have the resources to invest in a property, it’s just a matter of choosing what exactly to invest on. If you’re not keen on investing in condos, you may consider buying a house and lot or just land where you can build your own home. Here are some things to keep in mind to help you choose:
Buying a vacant lot
Pros
In terms of purpose, a vacant lot is more flexible than a house-and-lot unit. It’s up to you to decide what to use it for. You can build a house on 1. it, or you can lease it for office or commercial use. Should you decide to sell your lot in the future, you offer the same flexibility of use to your buyer. Take note, though, that this depends on the zoning—if the property is inside a residential subdivision, leasing out a lot for commercial use is not allowed.
2. When you buy a vacant lot in a gated village, you’re free to decide how your house would look like. You’re not confined to the designs of the available houses. You can build the house of your dreams, provided that your design adheres to the rules and regulations of your developer and the homeowners’ association.
Cons
If you buy a vacant lot in a residential village, chances are, it’s strictly for residential use. Eventually, you’ll have to have a house built on it.
However, you will have to look for your own design team: an architect, contractor, and workers. You will have to secure all the necessary permits for the construction of your house. Aside from the design, you will also be in charge of connecting your house to power and water supply and installing sewage treatment facilities. Check out Yan + Sotto Architects and Builders or AGSiochi Architecture and Design for services you’ll need when building a house. Additionally, be ready to go over your target budget by 20 to 30 percent for extra expenses, such as upgraded tiles, better fixtures, more paint, and possible fluctuating prices of raw construction materials.
Building a house is dependent on the weather. You will have to consider in which season to build your home—if it’s the monsoon season, there’s a chance that construction may be delayed.
Buying a house and lot
Pros
You get to enjoy the convenience of move-in ready units. Developers offering house-and-lot units usually offer several model houses to choose from, so you can pick which one suits your needs and lifestyle. You no longer have to worry about finding your own design team and workers—everything will be taken care of by the developer. All you have to do is wait for your house and lot to be turned over to you.
When you apply for a loan for your house and lot, both the house and lot are included in the terms. Some banks offer loans for purchases of lots. But if you decide to build a house on it, you will have to apply for a separate loan. A house and lot is treated as one, so when you apply for a home loan for it, both are already covered. Just ask your developer who their accredited banks are so you can secure a loan from them.
The value appreciation of a house and lot is higher than that of a lot. This article on inquirer.net says that “…the appreciation of land values is said to be faster when you buy a lot that already has a house built on it upon turnover.” This will yield a higher return on your investment. This is not to say that the value of a vacant lot will not appreciate—it also will, but at a slower rate.
The cost of a house and lot is fixed; home buyers won’t have to shell out any cash for possible additional construction requirements. But for homeowners who have had experience in buying a vacant lot–and prior knowledge of the additional costs a home may bring—they may feel more at ease building their own house.
Cons
You are free to do what you want with your interiors, but you cannot change the exterior. Doing so may incur a fine. Check with your developer to know what is allowed when renovating a ready-made home.
You will need to borrow a bigger amount from the bank. A bigger loan requires a bigger monthly amortization, so before you apply for a loan, make sure you will still have enough to cover your other expenses once you start paying for your mortgage.
Should you decide to sell your property in the future, a house and lot may be more difficult to market because it is more expensive than a vacant lot.