Buying real-estate for its utility value (not its "investment" value)

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#1

Hello everyone!

Looking to perhaps get some wisdom from you all regarding how to go about entering real-estate, from the perspective of someone who intends to disconnect from the system. I’m also younger and I’ve never owned property before.

A bit of a rant first - It’s clear to me that the real-estate market is treating household property first and foremost as a store of value, or means of generating income, instead of what it is actually intended for, which is clearly a means of supporting a family. As a result, there is a significant premium being paid for on property by buyers (“investors”) wanting to make a buck. The issue is that prices inflate to absurd levels such that the utility of the house, the family, takes a backseat to making money, and utility buyers are forced to take on large amounts of leverage from banks.

In effect, we’re commonly left with tenant-filled houses, empty houses and highly leveraged families. When your currency is getting devalued, everything else becomes a store of value, and sadly the house is no exception. This isn’t sustainable either, and will have to eventually collapse when the money printer finally explodes.

Personally, I’m not experienced with home ownership, and I need property to practice new skills. My thinking at the moment is that buying acreage with a damaged house for the land value nets me a “free” house that I can practice with. Maybe later I can build a structure of my own. Other options include buying bare land and moving onto it with a truck and RV, while building a house with my hands. As I said I’m not experienced so I’m leaning toward just getting a damaged house first. Not sure exactly how much leverage I want to take on for all this either - either way it’s not the most “optimal” financial decision for me. Optimal would be not buying property at all. But that comes at a personal competence cost I’d say, which isn’t worth it! I really want to learn.

How have others approached this? Any general tips are welcome, I know it’s tough to give specific guidance.

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#2

The rich rules over the poor, And the borrower becomes the lender’s slave. Proverbs 22:7 NASB

I like the sound of leverage, but I think you mean debt. I would avoid it if possible. If not, try to be sure there are no prepayment penalties, and that you only pay interest for the time you have the borrowed money. Some notes require that you pay all the interest you would have paid if you had paid it off in the normal, agreed-to time. At least some used to. Read the whole contract, even, or especially, if it’s long. If nothing else, it will surprise the lending agent. You may find it surprises you, in a bad way. Better to know what’s there, before you sign. Save your money now, if you can. I know that’s easy to say. I also know it’s hard to do. Not guessing here.

Damaged house or inexpensive land sounds like a good idea. Also the RV option. That also gives you something to work on, and learn on, and you can take it with you.

If you want to learn new skills, look for a junior college program that does construction. Maybe even a high school program if you have an exceptional high school near you. Near you may not really be near you, and whether such programs still exist, or where, I’m not sure. But if you can find one, you can learn, and make mistakes, in a supervised way, on someone else’s structure. Might also be possible to volunteer with a contractor or someone similar, in exchange for the education. Ask around. In the present job climate, at least where we are, there are more jobs than willing, reliable workers. Apprenticeship is a lost art in our culture, except for the construction trades. Maybe there’s a reason for that. Not that it’s lost, but that it has survived in the trades.

Look around, ask around, build or fix something small where you are (RV, maybe?).

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#3

Residential prices are still way over-inflated Joe. Not a good time to invest in property. If you have money saved for this purpose I would stick it into Precious Metals or even Bitcoin. One of my sons has made a a fair amount in Crypto’s. I’m too old to understand what backs them but a lot of people seem to get it. Every day your fiat currencies devalue. Commercial real estate is in free fall right now. Residential and farm will soon follow. The movers and shakers create these economic conditions to steal the assets of the people out working to support their families. If you look at the history of civilizations this game has been played out periodically. Put you dollars into something sustainable and in a couple of years what cost $ 100,000 today could sell for a tenth of that. Look at what the Chinese are doing as well as the Big US banks. They are buying as much gold as they can get their hands on. No one should take my word for this. The research is not hard to do.

The other thing is in few years, perhaps months, there will be no money for paying the wages of those charged with maintaining codes and inspections. These things have driven up the cost of housing many thousands of dollars over what was required even 20 years ago. Buying an old fixer upper will require a new electrical system, many plumbing improvements and possible lead paint abatement if it’s a house older than mid-1970’s.

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#4

Land and food are the primary stores of value. Every other medium be it gold, fiat currency or whatever is just a means of exchange. Not enough people remember this … I think crypto is a giant ponzi scheme myself with nothing backing it but hopium and hot air and eventually the music stops and the last one in loses. As to your strategy that depends on where you are and what your skill sets are. Rural land is cheaper with low taxes and less regulation but comes with far fewer services and possibilities of making a living. If your skill set matches a rural area you are golden if not its a road to long term poverty. Almost nobody can make a living working the land on a small scale so don’t fool yourself you need outside income. If your municipality allows the raw land/ trailer build up as you go then that is the play. If your town insists on dwellings before occupancy then using a run down place as “cover” is a better option. I built my first house with a “work trailer” on site once the permits were in place. The trailer was home until I moved into the basement and I kept renewing the permit until it was done. Debt level was low as I built it myself. Where I was when I did it it worked well. The current home we lived offsite and completed before moving in; times had changed, township was less forgiving. Results will change with location. As with any investment, land could shrink in dollar terms to half its original price… so what. You don’t loose a cent unless you buy high and sell low. Warren Buffett would argue that he had not made or lost money until he sold an asset. If you can afford the property buying makes sense if you are going to hold it. You could argue for waiting for a downturn but honestly people who can time these things are 50 percent of the time just lucky and spend far more time thinking about it then you have. If you see land as a long term asset then investing in it makes sense the profiteers are the ones who risk financial doom as to them its just a short term bet.
Cheers, David

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#5

Good thinkings so farJoeV.

I’d favor recommending the nail down a been run down property then live-in incrementally improving as the wife and I have done now three times.

Location. Location. Location for certain rules you choice. Here Washington State for most Counties legally raw land building up has become to permitting and regulations too bloody damn expensive. US inner mid-west much better for that approach.
You will be dealing with one-two, sometimes three time/money expensive factors to Live-It-Out no matter where. Our success has been much my auto ability to keep our L-o-n-g commutes for $'s working drains at a minimum. My wife’s abilities to cook from scratch and foraged and garden grown things.
Your success will be measured in decades. Not just a year or so. Takes that time frame to develop save-money skill sets anyhow.

I am old, old now. Have to hire out now half of the places work.
Me and many other who moved out true Rural and want to age out and be buried there.
This leads to a third possible option. Try out a few and find that old couple or gone down to guy or gal who actually owns and wants this. Be their young hands enabler.
Read the book . . . watch the made movie, “I Wish You Well”. These situations actually do happen in real life.
The stay in-place oldsters will be looking for someone who sets aside and wants to grind it out work, to escape the modern suck-you-in traps.

You will want to find the oldster who was willing to walk-away, spew-out from their own family bloods who just wanted want to Fancy live. Wether than be drugs, gambling or keeping up with the Jones’s. “I must buy that Tesla”
The oldster willing to age out with hurts, and die in place. Not insisting on hospitals tethering. Not living in fear.

There is just you. You only have to find a place “win” once. Screw the Ideas of markets; trends; best/worse for your generation, seducing and draining your life away, years, wasting distractions.

Getting a property to live on for the decades of your Life may indeed take you at least a decade too, As it has most all of us. Golden Ticket being fortunate given this never teaches husbanding holding a property.
Hard to be grind it out patient in a world gone ga-ga over instant now today gratifications.
Practical oldsters will judge you by the glitter of your DDD pocket phone. Dopamine Delivery Device.
By your impulsive tattoos.
By your hair? Not so much. Get really old it mostly is gone. Enjoy hair while you can.

Regards
Steve Unruh

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#6

I call those RBF’S Steve. radioactive brain fryers…

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#7

ATD : attention trapping device
guilty of it myself Obviously

#8

As an afterthough If you go the work for land route make damn sure things are spelled out clearly and in writing as soon as possible. I have countless horror stories of land being sold out from under hard working sweat equity people, couples, families, relatives. If it ain’t in writing its meaningless as you are one untimely death away from having nothing.

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#9

Errm. You may have a misconception on your ideology at least if you are from the US. The value of land is based on what someone is willing to pay for it. Location, location, location is the largest dictator of price. People will pay more to be closer to work, schools, shopping, a good neighborhood, etc. The utility value is not having to drive an hour to get to a store, school, or work. (and some people actually do it.)

You want to buy a cheap house that you can fix up to practice your skills, but other people have skills and can do the same thing. It depends entirely upon your perceived skillset which have not elaborated.

Any guidance is impossible because your perceived utility value of property is based on your perceptions of your skillset. It is a market, you are competing against people who don’t see the same ‘utility’ in the property or also have the same skillset.

It is actually becoming LESS common for wealthy people to own property because property isn’t their main source of income or their main interest. The average price of a condo in Manhatten, is 1.6+ Million dollars. You get zero property, and have to pay condo fees. A lot of condo’s lose money because the building they are in gets old. Property ownership is work, they just pay someone else to do it.

It really sounds like you are just complaining because don’t have enough money for what you want. If you have this skillset, then you have to figure out how to put yourself in a position to be in a position to capitalize on it. It might be in your best interest to rent the property to make money on it. But without knowing what you perceive as ‘utility value’, it is hard to give any advice.

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#10

10 years ago i stumbled onto a website auctioning off 40 acre wooded land parcels that were tax forfeited in northern Minnesota. We purchased 2 parcels for $300/acre. We bought them sight unseen. These parcels were logged off in the early 2000’s.
In 2015, my wife and i decided to build a 12’x20’ shed we could stay in. In the meantime, we stayed in a camper while building our ‘shed’. We lived 3.5 hours away from this land. After a few weekends of putting in a driveway, my wife said she wanted to live up here ASAP. We sold our house and moved. She got the house in the city ready for the sale as I spent the rest of the summer and fall building our shed/house. I knew nothing about building but knew people with experience, of which they gave me advice. I got to admit, the first winter was tough in many ways. Our parcels were 3 miles from any utilities. This means I needed to have a well drilled and solar system installed before winter. The struggle of keeping the wife comfortable with minimal amenities the first year was a bit challenging yet rewarding. Rewarding because it challenged me everyday. After the first year, we both loved our new life. In 7 years, I built a fairly self sustainable homestead in a least likely location to live. We started a small business making maple and birch syrup that we sell at small farmer’s markets. We live very comfortably on $1000/month and that’s considering ⅓ of that is insurance. We took a big risk and it’s paid big rewards. Granted, we were 49 years old and sold everything we had to invest in our new life. So, it was all or nothing. We set our goals high but, also realistic. We didn’t give up when our days were challenging. We stuck to what we bargained for. The wires you see in the picture is cable for internet in my buildings i spend the most time in, the garage and sugarshack. The internet is used mostly to learn.
I built two more cabins so my adult children and grandkids can visit in comfort.

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#11

Sean, thanks for the reply. Sure, utility value is subjective, and it is of course dependent on several factors such as proximity to services, size, beauty, etc. What I’m saying is that there is an extra premium being paid on top of this subjective utility value, because of the perception that real-estate is a store of value. The house, which has a utility value if you treat it as a tool, is actually being treated more like a growth stock, where people are willing to pay more initially because its price tends to appreciate over time.

It’s like I’m trying to buy a car solely for the purpose of using it to get from point A to point B, but the majority of the market will pay more than I’m willing to pay because they think the car will appreciate in price over time, and thus is hypothetically a good store of value.

Well that’s just the competitive market, so what? That’s fine, but real-estate appreciation over time is largely due to fiat currency depreciation over time, not because buyers are actually getting any more out of their purchase, and so the premium is not justified. In other words, your home isn’t getting more valuable, it’s that your dollar is getting weaker, and this illusion affects the market’s perception.

The absurdly high prices are even made more silly by the fact that housing is actually a liability - you pay utilities, tax, insurance, maintenance and, in most cases, interest to hold it. Uh, isn’t it against traditional wisdom to take out a loan, never mind a MASSIVE loan that you will spend the rest of your life paying, on an item that TAKES money from you? We know it’s more or less a poor financial decision to finance brand new cars, yet this is the norm when it comes to housing. And for what reason? Absolutely none other than there is a central authority printing paper out of thin air. Priced in actual functional money that cannot be debased, like gold or bitcoin, real-estate actually has gotten cheaper over time, as you would expect in a growing economy.

Be right back, I need to call my employer to start paying me in gold…

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#12

David, thank you. I will say that I absolutely do not yet have a skill set that matches a rural area. I have a blue-collar background but have lived in the city my whole life. I would in fact prefer to avoid poverty and so my attempt to learn rural skills would be done on acreage close to the city, that way I can continue to earn my regular income.

Tom, what is your thinking on where the current economic situation leads, based on history of civilizations? Personally I like precious metals and bitcoin, though I will have to sell all my hard money in order to buy acreage and avoid the bank.

I guess it’s location dependent, but is it viable to ignore code altogether (assuming you do your due dilligence regarding safety)? A lot of rustic builders off grid don’t take code into account. Perhaps I will have issues if I choose to sell down the road?

Steve, thanks for that suggestion of finding oldsters to do the heavy lifting for. I am still looking for such an arrangement, which might be difficult to find… I think many in that situation are not posting online looking for help. Or at least I haven’t yet found it.

Bill, thanks for that. How much did you pay to install your well? I know there are hand-driven wells but they are quite shallow. When purchasing land should I already be quite familiar with the depth of the water table? I wonder if it is worth purchasing the equipment to drill the well myself.

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#13

We don’t have a long enough ladder to get to the bottom of this hole Joe. From Biblical times we have been subjugated by what’s called Babylonian debt slavery every major event in history has centered around the manipulation of currency. This cannot be discussed in today’s climate without stirring up the rants about antisemitism and i’m certainly not interested in dancing across that bed of coals. However the roots of our current economic situation need only be traced back to the bail out of the US by the City of London bankers who were also partially responsible for supplying funds to both sides during the “Civil War”. Due to failure to meet the obligations of that debt the US congress was compelled to sign over the District of Columbia and incorporate it as a British owned corporation. Between then and the next economic crisis in 1893 approximately 12000 small banks were forced to close and the most viable ones that remained were often usurped by people like JP Morgan. If you had money in one of those failed banks it was just gone. No recourse. Much of that “common man” money had been loaned out to businesses who used it to purchase infrastructure and built their businesses. The actual deposited dollars were gone but the assets purchased with the loaned money were moved into the big bank books. Every crisis funneled wealth down to fewer players. 1913, the Federal Reserve Bank was established. The whole monetary structure centralized in one institution. I’m guessing this is boring to most but what the hell. It’s cold and snowing out and I need a distraction. The point is that each crisis was engineered to transfer wealth from the lower to upper rungs of the economic ladder. Right now we are playing the shell game. You may think these wars and “Rumours of Wars” are about the nations involved but what we are watching is the further funneling of dollars and euros from the tax payers of the respective countries into the pockets of the global control structure. When this game is no longer sustainable they will let the house of cards tumble and following the same plan they have used for millennia, they will put a new coat of paint over the tried and true feudal system we have always lived with in some form. Well we have arrived at the crumble time. Currency has breathed it’s last gasp. In the coming months the US will be Weimar. Very few of us own any money. Here we own Federal Reserve Notes backed by nothing but hegemony and less countries every day are still afraid of the big bad wolf. It’s true that any hard tangible asset you put your FERNS into will hold more value that your paper debt notes and just because PM’s have always been considered a hedge against inflation we assume that will still hold true but , we are entering uncharted waters now. In the proverbial blink of an eye the world will change. Soon, if you have tradable assets land will be available for the cost of paying the back taxes. I have witnesses this several times in my 77 years.

https://famguardian.org/Subjects/Taxes/Articles/USCorporation.htm

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#14

Hey JoeV.
You write well and can situational analyze well too.

You are correct it is a Game set up by others for their own benefit; setting their own rules; to funnel up your life efforts to their benefit.

I was raised Rural. Someone on each family farm had to shuffle into the City to earn the actual Caesar’s coin to pay off the decreed must-pays. Taxes. NO farm products barter trade allowed to direct relieve from this dictated you-must. So exchange trading then usually again a “money-changer” shrinkage fee needed.

This societal/cultural box we are all supposed trapped in is made of corrugated paper. The seeming enveloped bubble trap is actually a paper bag. You can tear yourself out any time you wish to give up the assured security they seem to offer. Their offered defined paths securities (water, heat, shelter, sewage, groceries, police and emergency responses) ALL come with obligation costs. Not a game you are ever supposed to get ahead in unless you go full buy-in and force your way up to Puppet Master level. And that an illusion. You’ll ever be a middle level player. Your value by how much, how many upward transfers of wealth you can shuttle. You allowed a percentage on the pass-thru.

I will tell you sure this . . .far easier to be a country mouse gone to the city than a city mouse gone to the country.
Our here in the true Rural we actually develop neighbors and friends relationships that is what gives the true real securities and support.
True. True. You can only develop these and true Rural need skills by being out here, and in-place.
Most all the still-in-the-city gums-gnashing; and over-thinking will prove to be not helpful and actually time wasted futile when you are out in the fun-fun muds and snows. Work sweating and incremental achieving is rewarding in ways that on-paper wealth numbers-chasing cannot compare.

Put this as a working perspective . . . anyplace out here Rural people do live daily and prosper mostly providing the necessities for themselves.
Trust the in real paper older books on how to do this (including going from the city) by 90%. “Five Acres and Independence”, The “Have More Plan” and many others published out decade by decade over the whole of the Urban building up 20th century.
Trust the Internet guidance to achieve Rural living only maybe 20%. You have to sort out a lot of noise. This is the new chaotic thriving vibrant seashore. The new made creeping growing jungle. Mostly living there hanging on waiting for a short duration tides changes.

Jump into the living-Rural waters and learn to float. Then swim. It is this providing water that is your security and friend.
Bill Schiller and Wife’s story. Jumping in and then build supportive little boats.
Most all of our own personal stories here are moving father out to places with less people making the minimal, you-musts, demands on us.
Sattelite internet and communication work everywhere now. Even down in hills surrounded hollows using repeater relays.

And there is a from a distance going-Rural mistake . . . most offerings are for plots of land with severe deficits. Never see the sun. Floods very year. Legal access impediments. Ground water contaminated.
Ha! Ha! Clay soil/sandy soils, and rocks can be delt with.

Regards
Steve Unruh

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#15

You’re right. Inflation is bad, borrowing and lending is not great and is related to inflation. People are bad, so it is unlikely to change any time soon. The goal is to figure out what to do in the light of this. If the price of land continually (more or less) increases, and it has useful value, and you need some place to live, maybe it’s a better investment than gold or bitcoin. Not as liquid, so that’s a problem. It can also be confiscated, but so can anything else.

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#16

Get onx and hit all the dead end roads. See something you like? Talk to the township supervisor and have them give you a zoning map of their township. Get a list of township ordinances.
To leave the system a property has to have:

  1. Water (even a year round wet mud hole). No water? Don’t buy it.
  2. An existing driveway or an easy going road commission. No easements to the county road, actual road frontage.
  3. Fuel. So if the property is purchased by land contract, it cannot have covenants, or restrictions for cutting down trees.

Talk to the health department. Do they want a raised drain field or some other crazy expensive septic systems? Better find out now rather than later.
Talk to the abstract company about title insurance. They will tell you a lot about the mineral rights on the property.

To squat on your property, it helps to not be visible from the road. Insist on it. Neighbors need to stay on their own property and mind their own business, but they can’t if you are out there in their view taking a dump in a hole in the ground.
Bill Schiller had the right idea. Look at tax sales.
Use an abstract company, not a realtor.
You can’t use a bank. You can take a loan out for a truck from a credit union. Just get a title for a clapped out new vehicle and borrow against the title.
Land contract is good. March it over to the abstract company, and have them explain it to you. No Balloon payments! No variable interest rate! Make sure the abstract company can provide title insurance. Have them explain to you what it means.

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#17

The subjectivity is what you deem as the ‘utility’ which is what I was asking. You initially said, you have skills you want to practice, then later say you have no rural skills. What is the point in buying the property in the first place? Why do YOU value having it? Because as you mention it can be a financial liability. If you want to grow your own food, you can do that on a half- acre city/surburbia plot.

In a lot of states, you need to pull a permit to drill a well. And most that do, require a licensed contractor to actually drill it. But that is up to state regulations, so your property may be difference.

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#18

I am a DIY fanatic but I wouldn’t be drilling my own well. A reliable source of water is surely the most valuable asset on a homestead. I’m not even sure what kind of equipment a person could buy for the job other than well points and some kind of framing for a drop hammer. Then you hit a boulder. A well drilling company has records of just about every foot of sub surface geology they have encountered in an area. They drill though rock. They have at least a clue as to where the aquifer layers may be. Even then it’s a crap shoot. My well is in an a strata of water starting at 100 ft and bottoming out at 135. The guy to my west drilled two wells 200 feet from my property line to irrigate a hops field he put in and those wells had to go 350 feet. Different aquifer. From analyzing the grindings brought back up while drilling, the professional has some gauge of whether water will be forthcoming. Always an expensive gamble. Finding a property with a existing well casing is a huge bonus,

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#19

Many moons ago I was just like you Joe. I couldn’t afford property where I grew up, so I started looking elsewhere. Now this was before internet, so I sent for a nation wide real estate catalog. I found at that time WV had the lest expensive land that was close to the state where I grew up. So after many week end trips to WV I found a suitable 55 acres, that had water(first thing to look for) which was a good spring. If your not dead set on living in a certain area you can find affordable land. What I bought was bare land no buildings, but it had trees. The second purchase should have been a sawmill, but it was a used mobile home that was cheap, sawmill came later.

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#20

Hi Joe!

First of all, you need to decide on the amount of time in your life that you plan to devote to this new knowledge of life outside the artificial life support system.

If it is 5-10 years old, then it is better to buy a mobile home and an old dilapidated house with a plot. Moreover, the condition of the house itself is not important at all – it is much more important to have a source of water and electricity on a piece of land. It is difficult to live without them, and extracting them can be very expensive and unjustifiable for such a small period of time in 5-10 years.

If you plan to spend more than 20 years on this knowledge, then, first of all, you need a wife, and secondly, you should seriously consider the option that Steve Unruh proposed, i.e. to settle next to the elderly. This may not seem like an easy task, but it has at least 3 huge advantages compared to the option of starting everything from scratch.

The first huge plus of living with the elderly on their land is the many years of hard work and good feelings they have invested in improving their living environment. The main household issues, one way or another, have already been resolved, so you can continue to improve, and not start from scratch, not knowing what pitfalls await you and your wife on your land.

The second, even more significant, advantage of living with older people is their life experience. Ordinary everyday knowledge, which is often completely deprived of a city person. You can get the knowledge that bread does not grow on trees firsthand.

The third advantage of older people is the history of an entire country, and possibly the whole world, undistorted by propaganda. After all, they have, in addition to their personal life stories, the stories of their loved ones and relatives from other places on Earth. And for the education of children and grandchildren who are immune to the next propaganda from all the media, truly free children and grandchildren, it is very important to know how people lived before, their stories, their dreams and hopes, to which they devoted their lives. What succeeded from this and what did not – all this is very important for children. And they can get all this from the elderly in an undistorted way, communicating every day, doing together those things that they are interested in and that they can do. It is difficult to overestimate the importance of this connection between the past and the future.

If you plan to live on Earth for more than 100 years (for example, 1000 years or much more – for an eternity), then you will need to plant trees on your site, including those that will live for so many years (cedar, oak, etc.), and also write in your Ancestral Book what your look at the purpose of man on Earth, and explain to your descendants why you planted these trees, and what knowledge and feelings you want to convey to them after such a period of time with the help of the Living Energy of these trees. These trees will be a beacon for your soul, so that it knows where its relatives are waiting for its incarnation in a new body.

It is also necessary to determine the size of the site. It’s one thing to grow some greens and a couple of cucumbers with tomatoes for a summer salad on your table, and it’s quite another to provide your family with all the products, starting from bread and ending with meat, milk and eggs. And even more so if you also want to provide income solely from products from your land. Then you will need to calculate everything carefully: how much money you need, what yield of a particular crop, how many and which animals you need to feed from your land, what equipment you will use for this and how much it will cost to maintain it. And a lot of things will have to be taken into account, or at least try to take into account on this interesting path … :slight_smile:

Now it seems to me that the easiest thing of all this was to find a wife who would be interested in this path. But I remember that I managed to solve this task not the first time, and it took more than one long year to find such a wife. But now they tell me that I’m lucky…

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