{ "media_type": "text", "post_content": "I am trying to buy a plot of land and was just advised that taking out a land loan for $25k is not the best decision and I might want to consider a HELOC or borrowing from my 401k. Both HELOC and 401k I have always been told are bad decisions. After thinking about it, I definitely want to go in with an all cash offer, just need to find the $25k. Any advice?", "post_id": "6089434245013c001c2c5801", "reply_count": 15, "vote_count": 3, "bowl_id": "5a5242b78e26290018502ca0", "bowl_name": "The Real Estate Bowl" }

I am trying to buy a plot of land and was just advised that taking out a land loan for $25k is not the best decision and I might want to consider a HELOC or borrowing from my 401k. Both HELOC and 401k I have always been told are bad decisions. After thinking about it, I definitely want to go in with an all cash offer, just need to find the $25k. Any advice?

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Heloc is not always a bad idea and not sure who is giving you that advice. The rates are great and it’s one of the best parts of owning.

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Yes it has all the approvals needed. Additionally they also had a soil test done, which is a requirement for building in that area. My plan is to buy the land to “save the spot”, then pay off the land and use it as the down payment for home construction plus whatever extra money I have saved up. Goal is to move to that area in 2-3 years.

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The big drawback here is that the building lot is a money pit. In addition to loan servicing fees and taxes, there are insurance fees, maintenance fees (your neighbors and possibly municipality) may require the lawn and plants be maintained. People may use the vacant lot as a dumping ground so there are clean up costs. You are a better judge of these potential costs and affordability than I am.

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The easiest way would probably be to borrow from 401K (because there is a pretty easy and defined way to pay it all back pretty quickly, pretax) or go get a hard money loan (as bridge financing). If all else fails, just go to SoFi and do a personal loan with a 10 year payback period and just pay it off as you can.

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Agreed with K3. Not suggesting a withdrawal, just a loan from 401k

How many acres and where? Is it raw land?

It would be 1 acre in Virginia on the river. This is so that My family can build our dream home (not an investment). I am not sure what raw land means. It is in a neighborhood, but will require us to find a custom home builder. The land is ready to be hooked up to electric, water, gas, and sewer.

Does it have all approvals to start construction? Have electric and gas service run to the property. Sounds like it, but I don’t know.

Just to add, it is a flat plot of land, however there are trees that will need to be removed. The land has been surveyed and the property lines marked and also there is an environment protected area in the back that is marked off as well.

Thank you so much for the insight! Those are all really great questions to consider. I’ll make sure to ask my realtor those questions and his thoughts.

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