Question: What is the proper relationship between the cost of a lot and the value of the house on it?
Answer: Old rules of thumb have lost much of their meaning. It used to be that land represented about one-sixth of the home’s purchase price. Then it moved up to one-fourth. And it will change again as the cost of land continues to rise or fall. Nevertheless, the land value versus house value ratio cannot be totally dismissed because it does, to some extent, affect the resale of the property. It may not make much difference if you put an inexpensive house on an expensive lot, but it could be a mistake to have too much house for the land.
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