Man Paying Cash With No Debt Wants To Buy Alaska Lots And Build, And The Real Estate Pro Warns It’s A Field Of Dreams Where Buyers Do Not Just Show Up

A caller named Steven had a plan that sounds like a dream to most of us. He is out of debt, owns his own home, says his retirement is handled, and wants to put cash into small lots of land in Alaska, then build on them.

A wooden cabin on a shore with a green mountain range across the water.

He told the hosts of @Ramsey_RealEstate that he lives on the Kenai Peninsula, not far from Anchorage. He is eyeing plots of 1 or 2 acres, or maybe a 5-acre lot that has electricity or could get it, for residential homes.

Vacant Land Can Mean A Million Different Things, The Pro Says

The real estate pro did not jump on the idea right away. His first answer was that vacant land can mean a million different things. It could be farmland, a hunting preserve, or the corner of a busy intersection where a McDonald’s might go someday.

It could also be land where warehouses or apartments could be built. So, he said, the answer hinged on what kind of land Steven had in mind.

He added a fun fact from a fishing trip in Alaska the week before. He said he learned the federal government owns about 166 million acres there, enough that you could fit six Texases in it.

“That’s Called A Field Of Dreams” And Buyers Will Not Just Show Up

Once Steven explained he wants to build homes, the host got specific. The answer, he said, depends on how active the new home market is in that immediate area.

If a big subdivision is going in half a mile away and you have lot prices to use as a baseline, that is fine. But if no building is going on and you plan to stand in the middle of a field hoping somebody will build a house because you want them to, he put it bluntly: “That’s called a field of dreams.”

His point was that you need trend lines in the growth pattern of the area showing that people actually want to buy there. A gut feeling does not count.

Steven Says Lots Sell The Moment They Hit The Market

Steven had a strong answer ready. He has lived there about three years, and he says this year as soon as a plot goes for sale, it is sold. He called it a super hot market, with big pipelines potentially coming in.

The host liked what he heard. He also liked that Steven would be paying with cash and had no debt, and he told him, “Great job.”

Still, he drew a line around what this kind of buying really is. Land like this, he explained, is speculation. You are not buying it for a 15-year hold. You are buying it for a two-to-five-year investment, and a lot of money can be made if the growth is truly heading that way. He said you might even double your money, but only if your analysis of the neighborhood is correct.

The Deal He Walked Away From, And The Buyer Who Cashed In Later

To make the point, he told a story from his own life. He and a friend, who owns a real estate company and runs all of his real estate, once looked at ground that could be split into seven or eight lots, about 10 or 15 years ago.

The property had a pile of trash dumped on it. By the time they added the cost of cleanup, a road and the land itself, they figured they could not recoup the money at the lot prices of the day.

So they backed away. Years later, he says, the value shot up. Someone else bought it, cleaned it up and sold it, and homes now stand there. Some of their best friends live in one.

His lesson was that the other buyer simply had a 10-year or 15-year mindset, while he had a two-to-five-year one. He said it is okay to walk away from a deal that does not fit your goals, and let someone else make the money. The ground, he noted, was never tainted. It was just a mess.

The Backup Question About REITs, With Numbers Attached

Another voice in the conversation asked whether REITs, which are funds that own real estate, could be a cheaper way in. The host said they used to fall into the play-around category, and that when they first came out about 25 or 30 years ago he told people to stay away because fees were so high that returns were low.

These days, he said, he has seen REITs yielding around 10, 12 or 15%, up around what a regular growth stock mutual fund might make. If you want one, he said, pick one with a good track record and get help from a pro.

He preferred the equity kind, which basically buys real estate, and said to stay away from mortgage REITs because many of them take on debt. He pointed out that you could start with $10,000 and be in the real estate market without buying a house.

When The Plan Makes Sense, And When It Does Not

His rule was clear. He would not do any of this until a person is ready to buy real estate, which in his plan is baby step seven. That means the home is paid off and 15% or more of income is going into growth stock mutual funds.

A REIT, he said, is not a substitute for that 15%. It is in addition to it. So if the house is paid off and you are putting 15% to 20% away for retirement with some extra money left over, a REIT is an okay place for that spare cash, but he said that fits only a very small share of listeners.

He summed up Steven as having the real estate bug and wanting to get in quick and easy. The better path, he said, is to buy as you would any long-term investment, planning to hold for 5, 10 or 20 years.

Your Checklist Before Buying Raw Land

Pick the land type first. Farmland, commercial and residential lots behave very differently.
Look for real nearby building activity and price baselines, not hope.
Decide your time horizon. Quick flips and 15-year holds are different games.
Price in cleanup, roads and utilities before you fall in love.
Give yourself permission to walk away.

Steven has the cash and the patience to ask smart questions. The advice he got was simple. Do the homework, and let the numbers, not the daydream, make the call.

Willow and Hearth