Help or Advice on Land Purchase

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Help or Advice on Land Purchase

Post by Trashguy58 » Wed Nov 14, 2018 11:08 am

Hey guys, looking for some advice on making a land purchase...
First, a little background... Ive been a State Trooper for appx 25 years and will be retiring in 2022.. I have zero debt and own a house (Appx $175k value), have appx $125k in my wife and I’s Roth’s and appx $300k in my 401k. I will have a pension when I retire.. Appx $4700 per month for life.. I will also receive a lump sum of Appx $375k on the day I retire.. I’m married w/2 kids. One in college, one going into high school..
Anyway, with that said.. My folks own 120 acres of land that was purchased by my parents Appx 20 years ago.. It was originally purchased for hunting and fishing, but they have since put a nice double wide mobile home, large barn, storm shelter on the land and had water and electric ran to the location.. The land fronts a two lane highway.. about 1/3 woods and the rest open farmland..
My parents have gotten old now and rarely visit or can maintain the place anymore.. However, I use it quite frequently.. Anyway, due to failing health and wanting the extra money for a safety net, etc my parents want to sell the place.. My dad knows I’m the only child interested in the land and has asked if I would be interested in buying the land from him at a large discount .. He has offered to sell me the land for $100k.. Appx $850 an acre or so.. The land that connects to the East of this land just sold last month for $1600 per acre and that’s pretty much the going rate in that area.. I’ve never seen land sell less than $1500 in that area.. and that’s just raw land..
Here’s my question.. I want to purchase the land.. What woulda be my best route to purchase the land??? Bank Loan, Home Equity Loan, Credit Union, Roth money, use my lump sum when I retire??? Just trying to think outside the box and I have never bough land.. I’m researching my options, but with so much knowledge on his forum, I know someone here will deal with these kinds of purchases and will know what the best route is for this scenario..
Any help, thoughts, advice would be greatly appreciate!
Thank You!”

Silk McCue
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Re: Help or Advice on Land Purchase

Post by Silk McCue » Wed Nov 14, 2018 11:36 am

Depending upon your parents needs you could let them hold a note and you pay them on a monthly basis.

Should they need long term care and have to go on Medicaid this below market sale MAY be considered an asset transfer that runs afoul of their rules which would cause them problems in obtaining that care.


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Re: Help or Advice on Land Purchase

Post by carolinaman » Wed Nov 14, 2018 11:52 am

I would not do Home Equity because I would not want to link this loan with your house. I like the idea of your parents letting you make payments until you retire and then pay off from your lump sum. Bank loans, mortgages, etc would have high closing costs for such a short time frame.

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Re: Help or Advice on Land Purchase

Post by Admiral » Wed Nov 14, 2018 11:58 am

Can the land be subdivided and partially sold? Does this interest you? 120 acres is a lot. Conceivably you could have your father sell off a parcel which would serve to give him some capital and (potentially) reduce your capital needs to purchase what's left.

Just throwing it out there.

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Re: Help or Advice on Land Purchase

Post by GmanJeff » Wed Nov 14, 2018 12:01 pm

Silk has a good idea. If they are willing to hold a note for you, the obligation won't show up on your credit report and you and your folks can work out repayment terms you both find acceptable, even a interest rate or loan duration you would not be able to find from a bank or credit union. You probably should ensure that you receive and record a deed in correct form at the time of the sale, to ensure there will be no future question of whether the property should be included in your parents' estates for probate and any potential inheritance tax issues.

If you do this, you want to be sure the note does not obligate you to repay the entirety of the loan principal early for any reason, such as upon your parents' passing. If you are their sole heir, the note terms might be written to specify that the balance due is forgiven upon the death of the second parent to pass, if such terms would be permissible under your state's law. In other words, be careful of using boilerplate legal documents or forms which may contain terms neither you nor your parents might really want to obligate you to under these particular circumstances.

Keep in mind that you'll be assuming responsibility for the real estate taxes.

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Re: Help or Advice on Land Purchase

Post by not4me » Wed Nov 14, 2018 12:28 pm

I'd like to see a little more info before suggesting too much. You mentioned being the "only child interested" -- I take that to mean that you have siblings. They may not be interested in the land, but not overly happy with these terms. How this affects your parents overall estate may be important. Likely can be worked out, but better to think through upfront.

You mentioned that ~80 acres was open farmland. Does this generate annual income that might be used to offset payments? If there is a loan, understand that the IRS has a minimum interest rate that must be met & your parents would have to report interest received as income. This may be a case for a balloon payment when you get your lump sum. Your parents would owe capital gains tax in the year it is "sold". If inherited you would get a step up in cost basis, but with a direct sale it wouldn't be. In addition to property tax, you'd have insurance as well once you become the official owner.

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Re: Help or Advice on Land Purchase

Post by LadyGeek » Wed Nov 14, 2018 5:13 pm

This thread is now in the Personal Finance (Not Investing) forum (real estate).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: Help or Advice on Land Purchase

Post by megabad » Wed Nov 14, 2018 6:18 pm

Of the options you listed I would likely pay cash only because mobile home/land interest rates will be measurably higher than traditional mortgage. However, for a multitude of reasons, I would personally hesitate to pay significantly less than FMV for the property. Why not pay a fair price? You want the land and the sellers are your parents so no reason to short them. If they don’t need the money, you will get a portion of it back via inheritance anyway (morbid thought I know).

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Re: Help or Advice on Land Purchase

Post by retire2022 » Wed Nov 14, 2018 6:58 pm

Try this

You may be better off having your parents gift you the property, I would discuss with accountant and estate attorney.

Btw I own 89 acres upstate NY and used proceeds of cash value of whole life insurance which was started 1980 29K which turned into 100K in 2014

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