Vacant Lake Lot. Sell or Hold?

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captaindorky
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Vacant Lake Lot. Sell or Hold?

Post by captaindorky » Thu May 09, 2019 8:53 pm

My wife and I own 105' lakefront frontage property 45 minutes outside a decent size city in Wisconsin. We bought back in 2007 and 2010, one original lot and then a half of another lot with a total cost of 118K.

Current state. Things have changed. While we had initially planned to improve the lot and build on it, that is no longer the case. It was listed FSBO for a while and there were a number of tire kickers but never a legitimate offer. I decided to list with an agent. She wanted 8% commission based on it being a vacant lot. Last weekend I received a call from a guy who had inquired a year ago about the lot (prior to me getting an agent) and was serious about making an offer. Given the fact I have an agent, I told him he would have to go that route.

List was 119K. He offered 75K. Counters back and forth have him at 85k stating final offer. I cringe at this loss. The problem is I am having difficulty finding any reasonable comps in the area. My fathers lot on the same lake 3 lots down was assessed at 100k back in 2016 and he only has 70 feet of frontage. I have 105 feet but the lot is unimproved.

I am having a very difficult time with this. Either I tell the buyer to take a hike, or I take this and walk away. Keep in mind I get a $1600 tax bill on this property annually.

The other option is to hold and hope for more interest. I'd lower asking to 99k. It is Spring in the Midwest, but I could be totally dreaming here.

One thing that pops into my head. My understanding is that I could write this off as a capital loss. If that's the case, the wife has a significant amount invested in Primecap that is NOT tax efficient and I could use this loss to liquidate a large chunk of that into something more tax friendly.

Always appreciate the thoughts and opinions of this group. What would you do?

CD

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Meaty
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Re: Vacant Lake Lot. Sell or Hold?

Post by Meaty » Thu May 09, 2019 8:59 pm

captaindorky wrote:
Thu May 09, 2019 8:53 pm
My wife and I own 105' lakefront frontage property 45 minutes outside a decent size city in Wisconsin. We bought back in 2007 and 2010, one original lot and then a half of another lot with a total cost of 118K.

Current state. Things have changed. While we had initially planned to improve the lot and build on it, that is no longer the case. It was listed FSBO for a while and there were a number of tire kickers but never a legitimate offer. I decided to list with an agent. She wanted 8% commission based on it being a vacant lot. Last weekend I received a call from a guy who had inquired a year ago about the lot (prior to me getting an agent) and was serious about making an offer. Given the fact I have an agent, I told him he would have to go that route.

List was 119K. He offered 75K. Counters back and forth have him at 85k stating final offer. I cringe at this loss. The problem is I am having difficulty finding any reasonable comps in the area. My fathers lot on the same lake 3 lots down was assessed at 100k back in 2016 and he only has 70 feet of frontage. I have 105 feet but the lot is unimproved.

I am having a very difficult time with this. Either I tell the buyer to take a hike, or I take this and walk away. Keep in mind I get a $1600 tax bill on this property annually.

The other option is to hold and hope for more interest. I'd lower asking to 99k. It is Spring in the Midwest, but I could be totally dreaming here.

One thing that pops into my head. My understanding is that I could write this off as a capital loss. If that's the case, the wife has a significant amount invested in Primecap that is NOT tax efficient and I could use this loss to liquidate a large chunk of that into something more tax friendly.

Always appreciate the thoughts and opinions of this group. What would you do?

CD
What does your RE agent say about the offer? He/she should be able to tell you if this is about the best you’re going to get, low ball, etc
"Discipline equals Freedom" - Jocko Willink

JoeRetire
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Re: Vacant Lake Lot. Sell or Hold?

Post by JoeRetire » Thu May 09, 2019 9:03 pm

captaindorky wrote:
Thu May 09, 2019 8:53 pm
I am having a very difficult time with this. Either I tell the buyer to take a hike, or I take this and walk away. Keep in mind I get a $1600 tax bill on this property annually.

The other option is to hold and hope for more interest. I'd lower asking to 99k. It is Spring in the Midwest, but I could be totally dreaming here.

What would you do?
I'm the "sell it for whatever I can get now" type of person.

But probably it depends on how much you need the money now, and what you think will happen to properties in your area over the next few years.

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captaindorky
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Re: Vacant Lake Lot. Sell or Hold?

Post by captaindorky » Thu May 09, 2019 9:05 pm

Great question. The buyer is going through my agent, so she would net the entire commission. It feels like a conflict of interest to me.
She suggested I do my last counter at 90K because I have a feeling she knows what the other parties top dollar is. Makes me uncomfortable.

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captaindorky
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Re: Vacant Lake Lot. Sell or Hold?

Post by captaindorky » Thu May 09, 2019 9:12 pm

I'm the "sell it for whatever I can get now" type of person.

But probably it depends on how much you need the money now, and what you think will happen to properties in your area over the next few years.
I don't need the money but the tax bill is extremely annoying. And given the fact I have no plans for this anytime in the future, I lean towards unloading it. It's in a low traffic area. Exposure is difficult.

carolinaman
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Re: Vacant Lake Lot. Sell or Hold?

Post by carolinaman » Fri May 10, 2019 7:43 am

captaindorky wrote:
Thu May 09, 2019 9:12 pm
I'm the "sell it for whatever I can get now" type of person.

But probably it depends on how much you need the money now, and what you think will happen to properties in your area over the next few years.
I don't need the money but the tax bill is extremely annoying. And given the fact I have no plans for this anytime in the future, I lean towards unloading it. It's in a low traffic area. Exposure is difficult.
I can relate to your dilemma. I owned a building lot in nice development in Charleston, SC area. We bought it to build our retirement home on but changed our mind. I saw it double in price before 2008 RE crisis, drop 50% afterwards and languish during RE recovery. All the while I was paying RE taxes and HOA fees every year. A homeowner adjacent to my lot called me and asked what I would take for it. I researched current RE prices and called him back and gave him my price. He accepted. I made a decent profit and avoided a commission on the sale. Shortly afterwards, RE got hot in that area and I could have made a lot more out of he sale. However, I was happy selling when I did. Paying $2k a year for taxes and HOA fees for something you will never use gets old.

However, it is harder to take a loss like you would if you sold now. What has the agent told you about comp sales. Is your asking price realistic? These types of sales take time to find serious buyers (I am ignoring the bargain hunters that always show up for these listings).

You have a hard decision. It is your decision, but if it were me, I would give it more time with a RE agent listing it. In the end you may have to take a loss but I would try to minimize my loss.

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SquawkIdent
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Re: Vacant Lake Lot. Sell or Hold?

Post by SquawkIdent » Fri May 10, 2019 7:50 am

I was in a very similar situation 7 years ago. The details you gave were very, very similar to my exact situation but my potential loss was much greater. And yes, I too hated that annual tax bill. Because I basically got nothing for it.

I decided to unload the lot and move on. I haven’t regretted that decision.

YMMV but IMHO these amounts are close enough to move on this now.

Good luck with this difficult decision. :sharebeer

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Watty
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Re: Vacant Lake Lot. Sell or Hold?

Post by Watty » Fri May 10, 2019 7:59 am

captaindorky wrote:
Thu May 09, 2019 8:53 pm
We bought back in 2007 and 2010, one original lot and then a half of another lot with a total cost of 118K.
2007 was pretty much at the peak of the housing bubble.

I obviously do not know your local market but it makes sense it would be hard to get that price today.

How much did you pay for the part you bought in 2010? That might be a better frame of reference.

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Re: Vacant Lake Lot. Sell or Hold?

Post by PVW » Fri May 10, 2019 8:06 am

captaindorky wrote:
Thu May 09, 2019 8:53 pm

List was 119K. He offered 75K. Counters back and forth have him at 85k stating final offer.

[...]

The other option is to hold and hope for more interest. I'd lower asking to 99k.

You are spending $1.6K per year for the possibility of getting an extra $14K (minus commission). That is not a gamble that I would pursue. Take the offer.

bob60014
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Re: Vacant Lake Lot. Sell or Hold?

Post by bob60014 » Fri May 10, 2019 8:17 am

My parents retired to Minocqua and we considered buying and build in the area too. When we would visit we read the local real estate listings and saw the same properties, built or vacant, available for sale year after year. It told us that unless the property was truly unique trying to sell would be a problem. It may be best just to cut bait and move on.

JoeRetire
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Re: Vacant Lake Lot. Sell or Hold?

Post by JoeRetire » Fri May 10, 2019 8:19 am

captaindorky wrote:
Thu May 09, 2019 9:12 pm
I'm the "sell it for whatever I can get now" type of person.

But probably it depends on how much you need the money now, and what you think will happen to properties in your area over the next few years.
I don't need the money but the tax bill is extremely annoying. And given the fact I have no plans for this anytime in the future, I lean towards unloading it. It's in a low traffic area. Exposure is difficult.
Yup.

Dumping the property for whatever you can get will immediately take if off your "extremely annoying" list. I like to keep my own list as small as possible.

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Sandtrap
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Re: Vacant Lake Lot. Sell or Hold?

Post by Sandtrap » Fri May 10, 2019 8:24 am

You have not had any serious offers since you decided to sell the property.
There are no comps.
It is an annual expense with no return, and will continue.
Based only on your information given.
Sell for what you can get and walk away.
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bubbadog
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Re: Vacant Lake Lot. Sell or Hold?

Post by bubbadog » Fri May 10, 2019 8:34 am

Sandtrap wrote:
Fri May 10, 2019 8:24 am
You have not had any serious offers since you decided to sell the property.
There are no comps.
It is an annual expense with no return, and will continue.
Based only on your information given.
Sell for what you can get and walk away.
Sandtrap summarizes this pretty well.

This is probably the best option.

Best of luck with your decision.

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Re: Vacant Lake Lot. Sell or Hold?

Post by Kenkat » Fri May 10, 2019 8:43 am

captaindorky wrote:
Thu May 09, 2019 9:05 pm
Great question. The buyer is going through my agent, so she would net the entire commission. It feels like a conflict of interest to me.
She suggested I do my last counter at 90K because I have a feeling she knows what the other parties top dollar is. Makes me uncomfortable.
I think this is how deals get done and is one way your agent earns her commission.

capsaicinguy
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Re: Vacant Lake Lot. Sell or Hold?

Post by capsaicinguy » Fri May 10, 2019 8:53 am

Sell baby sell!

Broken Man 1999
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Re: Vacant Lake Lot. Sell or Hold?

Post by Broken Man 1999 » Fri May 10, 2019 8:56 am

Kenkat wrote:
Fri May 10, 2019 8:43 am
captaindorky wrote:
Thu May 09, 2019 9:05 pm
Great question. The buyer is going through my agent, so she would net the entire commission. It feels like a conflict of interest to me.
She suggested I do my last counter at 90K because I have a feeling she knows what the other parties top dollar is. Makes me uncomfortable.
I think this is how deals get done and is one way your agent earns her commission.
Yes!

If the RE agent could have found a better offer she would have presented it, for more commission. She also knows there are limits where a prospective buyer would not go beyond. There is no conflict of interest. She earns her commission on what a buyer will pay.

I'd sell.

And, a year from now, the lots prices might be on a tear, but probably not. At the least you will have $1,600 less in expenses.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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Re: Vacant Lake Lot. Sell or Hold?

Post by lthenderson » Fri May 10, 2019 9:00 am

captaindorky wrote:
Thu May 09, 2019 8:53 pm
My wife and I own 105' lakefront frontage property 45 minutes outside a decent size city in Wisconsin. We bought back in 2007 and 2010... with a total cost of 118K.

It was listed FSBO for a while and there were a number of tire kickers but never a legitimate offer.

List was 119K. He offered 75K. Counters back and forth have him at 85k stating final offer.

Always appreciate the thoughts and opinions of this group. What would you do?
I would say it is over priced for the market today. Like the others, I would reduce the price and unload it.

dknightd
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Re: Vacant Lake Lot. Sell or Hold?

Post by dknightd » Fri May 10, 2019 9:00 am

Seems strange to loose money on lake front property.

oldfatguy
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Re: Vacant Lake Lot. Sell or Hold?

Post by oldfatguy » Fri May 10, 2019 9:24 am

dknightd wrote:
Fri May 10, 2019 9:00 am
Seems strange to loose money on lake front property.
Not sure of the OP's specific location, but Wisconsin has thousands of lakes of varying size and quality, many of which are in areas that are difficult to access and very expensive to develop. It's also a state with a rapidly graying population and declining economic activity in many regions.

I would take the offer and sell in this situation.

Gill
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Re: Vacant Lake Lot. Sell or Hold?

Post by Gill » Fri May 10, 2019 9:31 am

captaindorky wrote:
Thu May 09, 2019 8:53 pm
One thing that pops into my head. My understanding is that I could write this off as a capital loss. If that's the case, the wife has a significant amount invested in Primecap that is NOT tax efficient and I could use this loss to liquidate a large chunk of that into something more tax friendly.

CD
Did you buy the lot for investment purposes? You indicated you planned to build on it. Was this for a possible second home? Not likely you can deduct the capital loss.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

dknightd
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Re: Vacant Lake Lot. Sell or Hold?

Post by dknightd » Fri May 10, 2019 9:35 am

I agree. If you do not want it, sell it.

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captaindorky
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Re: Vacant Lake Lot. Sell or Hold?

Post by captaindorky » Fri May 10, 2019 9:38 am

Thanks for all of the responses. I have the 85k offer staring me in the face right now.

Yes - many lakes in WI. This area is relatively close in proximity to Green Bay and has full utilities, other than the need to drill a well for water. Many lakefront properties in the same general area lack sewer and cable/broadband. Access is easy.

As to the loss question, what determines whether it was an investment or intended to be built on?

I'm seriously leaning towards signing the dotted line and walking away from it.

Nowizard
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Re: Vacant Lake Lot. Sell or Hold?

Post by Nowizard » Fri May 10, 2019 9:39 am

We sold a lake house after almost two years of it languishing on the market at a reasonable price. Lake property is much like a boat in our opinion where the two happiest days are when you buy it and when you sell it. There are exceptions, of course, but that was our experience. We owned it for four years and sold it for about 15% less than we paid.
Tim

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Re: Vacant Lake Lot. Sell or Hold?

Post by TheExMexican » Fri May 10, 2019 9:40 am

Do you know if the buyer will pay cash or take a loan? Are you able/willing to offer owner financing if the buyer has decent credit?

This may be a way to make a little more than just the sales price at a 'guaranteed' rate. At least in my opinion, owner financing raw land is much less risky than a house, where it is hard to evict someone from their primary residence if they default, and they can destroy the property on their way out.

..just another option.

cableguy
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Re: Vacant Lake Lot. Sell or Hold?

Post by cableguy » Fri May 10, 2019 9:45 am

Hold this property. Pay the carrying cost. Chalk them up as a few extravagant dinners you couldn't pay the tab on. Your kids or grand kids will call you a genius. This type of investment pays off 20+ years down the road. And it will pay off....just need time....

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Eric
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Re: Vacant Lake Lot. Sell or Hold?

Post by Eric » Fri May 10, 2019 9:45 am

captaindorky wrote:
Thu May 09, 2019 8:53 pm
She wanted 8% commission based on it being a vacant lot.
I know this is water under the bridge, but it's not clear to me why the commission would be higher for a vacant lot. Seems like much less work for the realtor. She doesn't have to show the property, ooh and ah over the flooring and cabinets, or anything like that. I would imagine that most potential buyers would go see the property by themselves, without arranging to meet with her.

Eric

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Re: Vacant Lake Lot. Sell or Hold?

Post by Gill » Fri May 10, 2019 9:55 am

Eric wrote:
Fri May 10, 2019 9:45 am
captaindorky wrote:
Thu May 09, 2019 8:53 pm
She wanted 8% commission based on it being a vacant lot.
I know this is water under the bridge, but it's not clear to me why the commission would be higher for a vacant lot. Seems like much less work for the realtor. She doesn't have to show the property, ooh and ah over the flooring and cabinets, or anything like that. I would imagine that most potential buyers would go see the property by themselves, without arranging to meet with her.

Eric
Vacant land has always been higher commission. I've seen it usually at 10%
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

il0kin
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Re: Vacant Lake Lot. Sell or Hold?

Post by il0kin » Fri May 10, 2019 10:00 am

Have you considered building a reasonable 3 bed 2 bath cabin on it and then selling it? Lake properties always sell quicker when they have a cabin it seems like.

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Re: Vacant Lake Lot. Sell or Hold?

Post by Gill » Fri May 10, 2019 10:03 am

il0kin wrote:
Fri May 10, 2019 10:00 am
Have you considered building a reasonable 3 bed 2 bath cabin on it and then selling it? Lake properties always sell quicker when they have a cabin it seems like.
Seems like throwing good money after bad and greatly increasing the risk exposure.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: Vacant Lake Lot. Sell or Hold?

Post by Gill » Fri May 10, 2019 10:06 am

captaindorky wrote:
Fri May 10, 2019 9:38 am

As to the loss question, what determines whether it was an investment or intended to be built on?
Unfortunately the law isn't always clear in this area. It really turns on what your intent was in purchasing the property as evidenced by all the facts and circumstances.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: Vacant Lake Lot. Sell or Hold?

Post by SquawkIdent » Fri May 10, 2019 10:10 am

Gill wrote:
Fri May 10, 2019 10:03 am
il0kin wrote:
Fri May 10, 2019 10:00 am
Have you considered building a reasonable 3 bed 2 bath cabin on it and then selling it? Lake properties always sell quicker when they have a cabin it seems like.
Seems like throwing good money after bad and greatly increasing the risk exposure.
Gill
+1

I would not do that. And yes, I considered doing it in my situation but quickly realized this was increasing my risk of capital and I was very unsure if it would even work. It felt good to unload it at the current market value and move on.

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Re: Vacant Lake Lot. Sell or Hold?

Post by SquawkIdent » Fri May 10, 2019 10:14 am

Gill wrote:
Fri May 10, 2019 10:06 am
captaindorky wrote:
Fri May 10, 2019 9:38 am

As to the loss question, what determines whether it was an investment or intended to be built on?
Unfortunately the law isn't always clear in this area. It really turns on what your intent was in purchasing the property as evidenced by all the facts and circumstances.
Gill
Unless something was done to the property to clearly show of an “intent to build on it”, I see absolutely no problem claiming the capital loss. I’m not a real estate lawyer though. Any feedback on this for the OP?

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captaindorky
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Re: Vacant Lake Lot. Sell or Hold?

Post by captaindorky » Fri May 10, 2019 10:15 am

Watty wrote:
Fri May 10, 2019 7:59 am
captaindorky wrote:
Thu May 09, 2019 8:53 pm
We bought back in 2007 and 2010, one original lot and then a half of another lot with a total cost of 118K.
2007 was pretty much at the peak of the housing bubble.

I obviously do not know your local market but it makes sense it would be hard to get that price today.

How much did you pay for the part you bought in 2010? That might be a better frame of reference.
In 2010 I paid 35k for another 35 feet of frontage, making the total frontage 105 feet.

I had also considered making improvements to the lot including the possibility of a spec home, but I don't want to throw more money at this. There is no guarantee that would pay off.

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Re: Vacant Lake Lot. Sell or Hold?

Post by Eric » Fri May 10, 2019 10:25 am

Gill wrote:
Fri May 10, 2019 9:55 am
Vacant land has always been higher commission. I've seen it usually at 10%
Interesting. Do you know why that is? For commercial property, large undeveloped tracts, etc., I could see the broker adding value in helping identify and work with potential buyers. But if we're talking about a platted residential lot, ready to buy and build, I don't get it. What does the broker provide beyond the MLS listing and some hand-holding? Could the seller instead use one of those flat-fee services that charges a nominal amount just to put him on MLS?

Eric

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Re: Vacant Lake Lot. Sell or Hold?

Post by playtothebeat » Fri May 10, 2019 10:26 am

No one asked yet, but is the annual carrying cost a material item to you? I understand you said you cringe when you have to write that check, but is that because financially it is a big expense or simply because you’re writing a check for something you aren’t getting use out of?
If money isn’t a concern, you’re talking about $150 per month. Like someone said maybe it’s a gamble worth taking to pass on to your kids or grandkids one day.
Note this isn’t the “rational” decision, which of course would be to just sell and move on, but I’m thinking outside the box here

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captaindorky
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Re: Vacant Lake Lot. Sell or Hold?

Post by captaindorky » Fri May 10, 2019 10:41 am

playtothebeat wrote:
Fri May 10, 2019 10:26 am
No one asked yet, but is the annual carrying cost a material item to you? I understand you said you cringe when you have to write that check, but is that because financially it is a big expense or simply because you’re writing a check for something you aren’t getting use out of?
If money isn’t a concern, you’re talking about $150 per month. Like someone said maybe it’s a gamble worth taking to pass on to your kids or grandkids one day.
Note this isn’t the “rational” decision, which of course would be to just sell and move on, but I’m thinking outside the box here
I don't have kids so there is nobody to pass the property to. It's mainly the principal of it all.

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F150HD
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Re: Vacant Lake Lot. Sell or Hold?

Post by F150HD » Fri May 10, 2019 10:46 am

I might dump the realtor and make a flyer and post it at local bars/pubs/shops.

Before doing that, I would walk and talk to all adjoining neighbors to the property to see if they want to purchase it.

8% is steep.

May look at zoning it agricultural or forest land to reduce property taxes as well. Talk to your county.

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Watty
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Re: Vacant Lake Lot. Sell or Hold?

Post by Watty » Fri May 10, 2019 10:49 am

One other way to look at the decision would be to look at what economists call the opportunity cost of the choices you have. For example of you sold(and did not need the money for your living expenses) then you might use the money to do something like;

1) Buy an expensive RV and travel a lot.

2) Take a big vacation each year for the rest of your life.

3) Remodel your house.

etc.

If the choice is between keeping or the land or buying an RV it might make it easier to decide which you would prefer to have.

dknightd
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Re: Vacant Lake Lot. Sell or Hold?

Post by dknightd » Fri May 10, 2019 10:55 am

If you do not want to use it, and have nobody to pass it on to, I'd probably sell and swallow the losss.

dfeucht
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Re: Vacant Lake Lot. Sell or Hold?

Post by dfeucht » Fri May 10, 2019 10:56 am

One thought to potentially get a couple of thousand more. Since your realtor doesn't have to pay a buyer's agent in this instance and you did find the buyer initially could you get your agent to kick in whatever the buyer's commission normally is for vacant lots (2.7%-3%) back to you. Counter back at 90k as the realtor suggested, get an extra $2-3k and close the deal. I would think your realtor would have decent incentive to do this.

Bud
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Re: Vacant Lake Lot. Sell or Hold?

Post by Bud » Fri May 10, 2019 11:02 am

another perspective from the sunk cost viewpoint - knowing what you know now, would you but that property for $85k in your current situation? If the answer is no, then sell. If the answer is yes, continue to hold.

ronno2018
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Re: Vacant Lake Lot. Sell or Hold?

Post by ronno2018 » Fri May 10, 2019 12:03 pm

Sounds like you researched and even acted to improve the value (bought adjacent lot) and you have no desire to actually build on it soon, seems best to sell.

Just make sure there is no planned economic development nearby, zoning changes, new roads, etc that might increase the value soon.

The loss will not be that great if you divide by the number of years held and you learned a lesson about recreational property investment. :sharebeer

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Re: Vacant Lake Lot. Sell or Hold?

Post by flossy21 » Fri May 10, 2019 12:08 pm

F150HD wrote:
Fri May 10, 2019 10:46 am

Before doing that, I would walk and talk to all adjoining neighbors to the property to see if they want to purchase it.
I'd go see the neighbor on either side and tell them you have an offer at $85k. If they can beat it then you will sell to them.

Rolyatroba
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Re: Vacant Lake Lot. Sell or Hold?

Post by Rolyatroba » Fri May 10, 2019 12:28 pm

If I owned this, and wanted to sell like you, I'd take off the market and wait for the real estate agency contract to expire. I'd then put on a flat (low) fee MLS and offer 3% to the buyer's agent. The ~5% savings will pay for a few years of taxes, and there is a reasonably good chance that the valuation won't go down (as well as a chance that it will go up). I'd guess a lot of people shopping for land don't even have an agent, so you might save another 3% in this scenario.

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alpenglow
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Re: Vacant Lake Lot. Sell or Hold?

Post by alpenglow » Fri May 10, 2019 1:37 pm

captaindorky wrote:
Fri May 10, 2019 10:15 am
Watty wrote:
Fri May 10, 2019 7:59 am
captaindorky wrote:
Thu May 09, 2019 8:53 pm
We bought back in 2007 and 2010, one original lot and then a half of another lot with a total cost of 118K.
2007 was pretty much at the peak of the housing bubble.

I obviously do not know your local market but it makes sense it would be hard to get that price today.

How much did you pay for the part you bought in 2010? That might be a better frame of reference.
In 2010 I paid 35k for another 35 feet of frontage, making the total frontage 105 feet.

I had also considered making improvements to the lot including the possibility of a spec home, but I don't want to throw more money at this. There is no guarantee that would pay off.
There is no chance that I would consider building a spec home to chase a possible better return. Like most of the others here, I'd say sell and move on.

123
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Re: Vacant Lake Lot. Sell or Hold?

Post by 123 » Fri May 10, 2019 1:56 pm

Based on the OP's post from 2018 that he had $2M+ in total financial assets and non-home real estate besides the property in question I would advise to sell and move on. The purchase price of the property likely represented 5% or less of your total assets. The potential further gain/loss from a $90K selling price is likely less than the variation in the value of your portfolio on a very good or a very bad day in the market.

You are worried about peanuts in the context of your total financial position. You should sell and move on if holding the property is an annoyance. You have better things to do with your time.

A post from 2018 indicated the OP resided in the Arizona area so dealing with a property in Wisconsin is another factor.
The closest helping hand is at the end of your own arm.

Hockey10
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Re: Vacant Lake Lot. Sell or Hold?

Post by Hockey10 » Fri May 10, 2019 2:05 pm

OP, have you contacted the adjacent property owners? They may not know that you are trying to sell the lot.

I was in your situation over 20 years ago with a lot in a NC lake community. I had purchased it over 30 years ago. I had finally decided to do something about it.

I first got an appraisal from a local NC appraiser. Then I took a trip down to NC (I used to live in the area, but not any more). I met with the appraiser, then took a trip over to the lot. To my pleasant surprise, the next door lot had a brand new home on it. I knocked on the door and asked the homeowner (wife) if they knew anyone interested in buying the lot next door. Within a day, I got a call back from the husband with an offer to buy the lot. We went back and forth on price, and I eventually sold it at about 30% less than I had bought it for. The appraisal said it was worth 25% less.

I was relieved to unload it at that point. Lesson learned - if you are going to buy vacant land, make sure you have a plan to build on it within a few months after purchase instead of holding onto it forever in hopes of appreciation.

not4me
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Re: Vacant Lake Lot. Sell or Hold?

Post by not4me » Fri May 10, 2019 4:03 pm

captaindorky wrote:
Fri May 10, 2019 10:41 am

I don't have kids so there is nobody to pass the property to. It's mainly the principal of it all.
Others have adequately helped lay out the quantification & I can't add to that. IMHO, all real estate is local & you have experience in knowing how active that local market is/has been. It is interesting that you had someone follow-up after a period of time. Sounds like they are interested if the price is right, but they haven't gotten any better deal. May indicate a bottoming of the market -- or that there will be little turnover anytime soon.

Since your father owns a similar lot close by, have you considered the affect on you should he hold & you one day inherit? Do you have siblings that might be interested? The lots between the 2 of you may be your best chance. I assume your father is aware of your interest in selling & would have already pointed you to any possible buyers he might know. I assume you've considered any local conservation groups that might be interested and/or ways to mitigate the property tax via easements etc

Good luck. Would the decision be any easier if it were stock and no one else knew you had this?

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arcticpineapplecorp.
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Re: Vacant Lake Lot. Sell or Hold?

Post by arcticpineapplecorp. » Fri May 10, 2019 4:52 pm

sorry about your situation. Few thngs to think about:

1. How did you come up with listing it for $119,000? If you paid $118,000 why do you only want to make $1000 over 12 years? That's a lousy rate of return. Is it just because there's no buyers so far? How do you know what it's worth if there are no comps? Are you going off the tax assessment?

2. Could it be doing so much worse because you're not starting high enough? I mean if you bought it for $118k and you want to make a profit, and you know you start high and they go low and you both wind up in the middle, why would you start so close to what you bought it for? You would only end up far below your purchase price which doesn't make sense.

3. If you're paying $1600 a year on an "investment" you originally paid $118k for then your annual expense ratio is 1.35%...per year. ($1600 / $118,000 = 0.135). So ask yourself do you like to pay an expense ratio of 1.35% per year for your investments? If not, then don't continue doing that.

look at what an expense rato of 1% or 2% would cost you over 10 years...
http://web.archive.org/web/201611100649 ... f-returns/

that's right, the costs (taxes) have cost you between 9.5% and 18% of your ending wealth in this investment. But actually it's worse than that because if you sell for 85k you've lost another $33k on top of the taxes.

See people like to do mental accounting which means they don't often account for all the costs of real estate. There was a great piece years ago by a respected financial journalist (can't remember who) who actually kept track of all the taxes, insurance, and repairs and even though he sold the property for well above what he bought, in the end he either didn't make a profit or made a very tiny profit (less than the rate of inflation, so he admitted he lost money in real terms). That's how real estate can go (not always, but it's not the slam dunk people like to make it out to be). Yeah, I know land is different and real estate is about location, etc. This is only making my point. Real estate can be fickle, neighborhoods can change, demographics, and so on.

I say sell it even though you're taking a loss. At least you won't keep paying a 1.35% expense ratio on your "investment" into perpetuity. If you take the $85,000 and invest it in a low cost index fund, I'm sure you'd more than make back what you lost over time. And best of all, you'd be more diversified and paying less fees.

4. What something is worth is not what you think it is, or not based on what you paid for it, but rather only what someone else is willing to pay. You've obviously anchored on the price of 118k because you want to make back what you invested, but could you have overpaid? Or has the market simply changed since then and it's just not worth what it used to be (because people don't want it like they used to)?

5. Finally, it's often said that when determining if you should sell ask yourself the question, "If I didnt' own this land right now, would I go out and buy it at the current price (say $85k)?" If not (because of what you now know), then just sell it. It's worth $85k because that's what someone's willing to pay for it. If you wouldn't even buy it for $85k then at least sell it to someone else who will.
Last edited by arcticpineapplecorp. on Fri May 10, 2019 5:23 pm, edited 2 times in total.
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staythecourse
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Re: Vacant Lake Lot. Sell or Hold?

Post by staythecourse » Fri May 10, 2019 5:01 pm

If you have no intention of moving there I would sell. I would tell the buyer to wait until your contract with the sellers agent expires. I think it is ethical as he/ she did approach you PRIOR to having a sellers agent.

I don't know why you care about comps. You are getting offers based on what the market is willing to give. IF that is the best you can get over all this time then that is the most it is worth. It is like a worker thinking they should make x salary. You are only worth x salary if you can find an employer to offer you that salary otherwise it is just you hoping to get x amount.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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