Colleague given land in Fla Keys

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FredCouples
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Colleague given land in Fla Keys

Post by FredCouples »

A teacher colleague approached me about her situation, here is what I can recall from our conversation:

She was given property in the Fla Keys and cannot sell it but it is ready to be developed(house) put on it.

Does not have cash flow to build a rental/family vacation home on it.

Asked if she should cash out 403b to build the home (cost $200k). (Shes in her 50s with retirement less than 10 years away) Didn't ask how much

Has a primary residential mortgage balance of $150k on home worth $600k approximately.

She was not crazy about taking out a mortgage or if she would be approved. (Have a feeling she might have credit issues)

I mentioned Home Equity Loan or Refinancing but she wasnt crazy about that.

What are your thoughts? Options for her.
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Taylor Larimore
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Re: Colleague given land in Fla Keys

Post by Taylor Larimore »

She was given property in the Fla Keys and cannot sell it but it is ready to be developed(house) put on it.
Fred:

That's strange. The Florida Keys are now one of the "hottest" real estate markets in the country?

Florida Keys Real Estate

Best wishes.
Taylor
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YttriumNitrate
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Re: Colleague given land in Fla Keys

Post by YttriumNitrate »

FredCouples wrote:Asked if she should cash out 403b to build the home (cost $200k). (Shes in her 50s with retirement less than 10 years away) Didn't ask how much
She would get hit with income taxes plus a 10% penalty by doing this...seems like a bad idea.
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FredCouples
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Re: Colleague given land in Fla Keys

Post by FredCouples »

Taylor Larimore wrote:
She was given property in the Fla Keys and cannot sell it but it is ready to be developed(house) put on it.
Fred:

That's strange. The Florida Keys are now one of the "hottest" real estate markets in the country?

Florida Keys Real Estate

Best wishes.
Taylor
She didn't specify how she got but it sounds like an inheritance.

Might have to charge her for advice. One week for free next 50 years ought to be fair. Lol.
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FredCouples
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Re: Colleague given land in Fla Keys

Post by FredCouples »

YttriumNitrate wrote:
FredCouples wrote:Asked if she should cash out 403b to build the home (cost $200k). (Shes in her 50s with retirement less than 10 years away) Didn't ask how much
She would get hit with income taxes plus a 10% penalty by doing this...seems like a bad idea.
Yes, she is aware of this.

I thought refinancing or HEL would be best.
mnvalue
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Re: Colleague given land in Fla Keys

Post by mnvalue »

That sounds insane to me. At best, even if she wants a house there to retire to and will sell hers, it sounds like a bad idea.
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TimeRunner
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Re: Colleague given land in Fla Keys

Post by TimeRunner »

Help me understand why she can't sell it for some amount of money.
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Jack FFR1846
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Re: Colleague given land in Fla Keys

Post by Jack FFR1846 »

If she can't sell the land, can she lease it? I'm thinking that the will perhaps stipulated that she could not sell the land for X number of years....or ever. Perhaps lease the land for a small amount per year with a long term lease. A builder can then build on the property for another buyer and the house sold and the land being leased.
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123
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Re: Colleague given land in Fla Keys

Post by 123 »

Another possibility is that she has only a "life estate" in the use of the property and that upon her death it passes on to someone else or another organization.

If she can't sell it then whatever she does to improve it is lost upon her death. If the ultimate beneficiary is a relative of hers then she could improve the property to the extent that she wants to make a gift of the improvements to the subsequent beneficiary.

If she only has the property for her life then that makes it hard to lease, the lease would end at her death, which, from the point of a potential lessee, could occur at any time.

Maybe this is a situation where she makes minimal improvements to the property, like a tent or a trailer, with utility connections just for her own use. It seems like the subsequent beneficiary would not be motivated to help her financially with any improvements since it could easily be 20 - 40 years before they get the property.

All that said it may be that the primary benefit of the inheritance may be the right to pay the property taxes or is there some kind of angle there?
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FredCouples
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Re: Colleague given land in Fla Keys

Post by FredCouples »

Jack FFR1846 wrote:If she can't sell the land, can she lease it? I'm thinking that the will perhaps stipulated that she could not sell the land for X number of years....or ever. Perhaps lease the land for a small amount per year with a long term lease. A builder can then build on the property for another buyer and the house sold and the land being leased.
The impression I got is that was stipulated somewhere she couldn't sell it.

Interesting idea with the lease. Would someone want to build on that type of situation?

Will run it by her.

Her idea was to build a rental house on the property to pay for itself and have family vacations there.
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JonnyDVM
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Re: Colleague given land in Fla Keys

Post by JonnyDVM »

As a guy that frequently visits the keys (actually going in April) I would suggest that this is not a good idea. Those houses are all one good storm away from being flattened. I'm sure the part of the keys it is located in has something to do with the difficulty in selling it. Some parts are a little more "red" than others. The obvious thing to do would be to either reduce the asking price or just continue to hold. Why pay a tax penalty to build a vulnerable house (ie expensive to insure) on a piece of land that it sounds like she really wants to unload as easily as possible?
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HomerJ
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Re: Colleague given land in Fla Keys

Post by HomerJ »

FredCouples wrote:The impression I got is that was stipulated somewhere she couldn't sell it.
Wow, so she got an obligation to pay property taxes for an inheritance?

Nice.
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JonnyDVM
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Re: Colleague given land in Fla Keys

Post by JonnyDVM »

I'm sorry I misunderstood, I thought you meant no one would buy it without a house on it, not that she wasn't allowed to sell it. That's strange. I don't have an answer for that one. Was it also stipulated that she had to spend a night in a haunted house before she got the property. :twisted:
Last edited by JonnyDVM on Thu Feb 13, 2014 5:07 pm, edited 1 time in total.
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technovelist
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Re: Colleague given land in Fla Keys

Post by technovelist »

Can she give it away?
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FredCouples
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Re: Colleague given land in Fla Keys

Post by FredCouples »

JonnyDVM wrote:As a guy that frequently visits the keys (actually going in April) I would suggest that this is not a good idea. Those houses are all one good storm away from being flattened. I'm sure the part of the keys it is located in has something to do with the difficulty in selling it. Some parts are a little more "red" than others. The obvious thing to do would be to either reduce the asking price or just continue to hold. Why pay a tax penalty to build a vulnerable house (ie expensive to insure) on a piece of land that it sounds like she really wants to unload as easily as possible?
That was also a concern of mine.

Could end up being a pain in the butt since she is not too financially literate.
z06ray
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Re: Colleague given land in Fla Keys

Post by z06ray »

What key ?

My brother just bought a house in key colony beach (exclusive part of marathon key). Its booming there!
WhyNotUs
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Re: Colleague given land in Fla Keys

Post by WhyNotUs »

[OT comments removed by admin LadyGeek]

If you cannot sell it, then I do not think you can use it as security for a loan-- perhaps foreclosures don't count on restriction. I hope that taxes are not very high, otherwise that could be a bad gift- something that you cannot sell but have to pay taxes on.
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davebarnes
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She needs a lawyer, maybe 2

Post by davebarnes »

1. A estate lawyer to really explain/understand the restrictions.
2. A real-estate lawyer to help set up a long-term land lease if that is feasible.
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123
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Re: Colleague given land in Fla Keys

Post by 123 »

Instead of a life estate situation it might be the property is jointly owned with someone(s) else and the other party(ies) won't consent to a sale. That situation would also likely confound leases or loans (or anything that could potentially involve loss) involving the property.
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LordB
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Re: Colleague given land in Fla Keys

Post by LordB »

Personally it sounds like she should consider refusing this inheritance. She does not have the assets to take advantage of this and the no sell restriction is going to cause major issues that I have to doubt if can be easily managed by someone unfamiliar with real estate over a great distance. If she can't do any of that all that is going to happen is she is on the hook to pay taxes on it and get no value out of it.

That said honestly without knowing what the actual restrictions/situation is I don't think anyone can give very good advise here. There are too many unknowns that make it impossible to give accurate advise.
stan1
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Re: Colleague given land in Fla Keys

Post by stan1 »

LordB wrote:Personally it sounds like she should consider refusing this inheritance. She does not have the assets to take advantage of this and the no sell restriction is going to cause major issues that I have to doubt if can be easily managed by someone unfamiliar with real estate over a great distance. If she can't do any of that all that is going to happen is she is on the hook to pay taxes on it and get no value out of it.

That said honestly without knowing what the actual restrictions/situation is I don't think anyone can give very good advise here. There are too many unknowns that make it impossible to give accurate advise.
I was thinking the same thing: refuse the inheritance. The land is worse than worthless if she can't sell it or build on it (plus owes property tax). Only chance might be if she wants to retire there within a few years, but $450K of equity might not go very far on a new construction house in the Keys.
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DualIncomeNoDebt
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Re: Colleague given land in Fla Keys

Post by DualIncomeNoDebt »

FredCouples wrote:She was given property in the Fla Keys and cannot sell it but it is ready to be developed(house) put on it. . . . What are your thoughts? Options for her.
You need to do the following, and I sincerely hope you do at least some of this. Have a good real estate lawyer determine (i) how this "no sale" restriction arose, including a review of the written instrument, (ii) careful review of the particular restriction at issue, and (iii) whether this particular restriction, in the particular instrument where it arises, is valid. And she'll need to do a search for any other written instruments concerning this property. It will take time. You must advise her to not make a rushed, foolish decision out of ignorance.

You say she was "given" the land. I don't know if that means inherited, gifted, etc. But here's just one example for you: if land is inherited, the Rule Against Perpetuities may -- and I emphasize may -- forbid the particular restriction your friend was advised about, especially if the restriction is worded in such a way that it would lock up the land for centuries, or even millenia.

As a general matter, real estate law is loathe to allow testators to control land from beyond the grave for centuries and millenia. Take to its logical extreme, dead landowners could impose onerous restrictions for millions of years, or even until our Sun goes red giant and the Earth is incinerated (not exaggerating, it's been tried in inheritance documents). Real estate and trust & estate law prohibits locking up real estate in this way.

On the other hand, who knows how this restriction arose -- is it a Florida state zoning rule or ordinance concerning this particular parcel?

To conclude, just because she was told she "cannot sell it" does not make it so. Do not -- do not -- rely on the opinion or advice of anyone other than her own legal advisor who is well-versed in real estate law, and get a written opinion and analysis, and maybe even a second opinion. Merely because some trustee or probate clerk told your teacher friend the land cannot be sold, does not mean this is correct. These types of clauses get challenged all the time. And neither the transferring document, nor the trustee/probate clerk, is the final word or authority on the matter. They are not. You need independent counsel.

You need to look at the particular instrument with this restriction, look at the particular restriction, examine how and why the restriction arose, and undertake a detailed analysis concerning whether it is valid. This is a tricky analysis and the rules are very difficult to apply. So get some pro help.
Last edited by DualIncomeNoDebt on Sat Feb 15, 2014 11:45 am, edited 2 times in total.
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Watty
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Re: Colleague given land in Fla Keys

Post by Watty »

stan1 wrote:
LordB wrote:Personally it sounds like she should consider refusing this inheritance. She does not have the assets to take advantage of this and the no sell restriction is going to cause major issues that I have to doubt if can be easily managed by someone unfamiliar with real estate over a great distance. If she can't do any of that all that is going to happen is she is on the hook to pay taxes on it and get no value out of it.

That said honestly without knowing what the actual restrictions/situation is I don't think anyone can give very good advise here. There are too many unknowns that make it impossible to give accurate advise.
I was thinking the same thing: refuse the inheritance. The land is worse than worthless if she can't sell it or build on it (plus owes property tax). Only chance might be if she wants to retire there within a few years, but $450K of equity might not go very far on a new construction house in the Keys.

+1

The adjacent landowners might be willing to lease the land for a modest amount even with all the restrictions just to get the use of it and to prevent it from being developed for a long time.

Even if everything else was Ok I can't imagine what the insurance would cost there to cover hurricanes if she can even get it. If you are a multi-millionaire having that sort of risk might be OK but it sounds like she is not even close.

If she keeps it she should also get liability insurance for the property just in case someone is hurt on the property.
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Re: Colleague given land in Fla Keys

Post by linenfort »

tjschraf wrote:What key ?

My brother just bought a house in key colony beach (exclusive part of marathon key). Its booming there!
I'd like to know, too. Big difference between Key West and Marathon vs most of the rest.
Draak
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Re: Colleague given land in Fla Keys

Post by Draak »

delete
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bottlecap
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Re: Colleague given land in Fla Keys

Post by bottlecap »

Got to be a life estate. The alienation of land can rarely be restrained.

She would be crazy to take all of her retirement out now to invest in real estate she can't sell. My answer would be an unequivocal "No way."

JT
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