Potential Family Land Sale - 120 Acres Austin, TX Area

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ef11
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Potential Family Land Sale - 120 Acres Austin, TX Area

Post by ef11 »

Hello Fellow Bogleheads,

Have a situation I would like some peer opinions on to ensure we are not missing anything in our analysis.

My family has had a tract of land in our family for over 100 years, just outside of Austin, TX. It is ~120 acres, Ag-exempt, we have a small company that pays us to farm the land each year as well as wildlife management being done on the property, so annual taxes and expenses are very low. Land has one small county road that runs by it, about 1,600 feet of land is adjacent to that road with the rest being surrounded by other farm land. Most of the area around us for 1-2 miles is still farm land, so businesses and houses and high traffic flow is not right by our land, but likely will be in the next 10-15 years. Appraised value is over $2 MM and any gains would be long-term. It is owned by an LLC that is owned by three family members, including myself. Our ages are ~70, 30, and 30.

If you want to look on a map, go to Toll 130 where it intersects Pecan Street. Coordinates 30.424536, -97.585786 Our land is 3-4 miles east of that. I know it's not as "Austin" as you all were probably thinking but figured most would not know this location well.

The area is growing quickly, utilities are being brought right by our land, Amazon is building a distribution center 3 miles away. Warehousing/business is moving towards our land from the west and housing developments are being developed towards our land from the east and the south. Our extended family owns many different tracts of land in this area, and one Trust sold land last year for $176,000/acre for retail development (owners of the LLC discussed received < 10% of the proceeds).

Only negatives we see about the property at this time are that about 50 acres is considered to be in the floodplain. Home developers typically seem to like some access to water so hasn't deterred them to this point. In the city's 2030 plans, they show a potential road dividing our land, but of course if a development is built that wouldn't be the case.

We have an offer in hand for $2 MM on the property and also have a privately held and publicly held company in discussions with us and we anticipate higher offers from them based on our initial discussion. The current offer and the public company have plans for single-family home development. The private company (family owned) has said they want to buy and hold for the long-term with no near-term development plans.

The three owners of the LLC have combined taxable investments accounts of over $5 MM and really have no need for the money today. Our lives would not change at all by selling the land now.

We feel the fact that we already have so much money invested in the equity markets, that the land provides us good diversification. What if we were to sell and then go through another "lost decade", we would feel foolish to have all of our eggs in one basket - the global equity markets. But what if we get an offer for $3 MM or $4 MM? If we could go back in time and get the money in March of 2020 I think we would do it in a heartbeat, hindsight is nice ha. But with markets already having recovered It's hard to imagine dumping the proceeds into the market and hoping the next 10 years is even close to the returns of the last 10 years.

Just a lot to weigh and the biggest financial decision of our lives, so would like any input from anyone that has any thoughts or has even been through a similar situation.

*EDIT - Quick update on the offer's we've received all within the past couple of months.

Company 1:
First offer - $1.5 MM
Second offer $2.0 MM

Company 2: Received offer 10/8/20
First offer - $3.15 MM

Company 3:
Working on an offer but have not presented one yet.
Last edited by ef11 on Fri Oct 09, 2020 1:26 pm, edited 6 times in total.
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petulant
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by petulant »

Can you enter an agreement with developers that does not involve sale for all of the land, by keeping rights over major corners and/or other parts that would be ideal for commercial? You could then keep commercial and work with a developer for NNN-type revenue. Might be able to use the sale of part of the land for residential purposes to pay for buildings on commercial part.

Can you 1031 exchange it for different raw land further out from Austin? You may be able to buy a lot more land and not pay any income tax.
Jack FFR1846
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by Jack FFR1846 »

While a smaller plot, I've looked at ways to sell off some of my property. This would involve sub-dividing the property and selling lots behind existing houses. My property is mostly ringed by a 20 year old development and several owners have approached me to ask if I ever want to sell, they'd want to buy an acre or so. You may be able to do even more than this. Sub-divide to sell lots for business on the existing street. Keep the vast majority of acreage for the farming and family future use or sale. Your description tells the story that the current value is really nothing compared to what it will be soon.

I would ignore the current offer and think of maximizing what you can get. Leave multiple ways to access the property from the existing road. I don't know Texas, but know that in my own town, a development must have at least 2 access roads.
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a_movable_life
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by a_movable_life »

" Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
MBB_Boy
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by MBB_Boy »

a_movable_life wrote: Fri Oct 02, 2020 7:33 am I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes.
:annoyed

Love,
A local native
a_movable_life
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by a_movable_life »

MBB_Boy wrote: Fri Oct 02, 2020 8:12 am
a_movable_life wrote: Fri Oct 02, 2020 7:33 am I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes.
:annoyed

Love,
A local native
CA, NY, NJ, MA, MD have the issue of being on the wrong side of a "Race to the bottom" combined with mobile workers, leadership willing to go where the tax savings really are astronomical for them, and critical mass in some of the relocation cities for certain groups makes some of these places like Austin, Atlanta, and Knoxville more palatable.

For the OP, waiting and then leasing the land to someone building an office park may be the equivalent of the endowment for Cooper Union in NYC. The gift that keeps giving to your Grandchildren or Great Grandchildren.
petulant
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by petulant »

a_movable_life wrote: Fri Oct 02, 2020 8:28 am
MBB_Boy wrote: Fri Oct 02, 2020 8:12 am
a_movable_life wrote: Fri Oct 02, 2020 7:33 am I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes.
:annoyed

Love,
A local native
CA, NY, NJ, MA, MD have the issue of being on the wrong side of a "Race to the bottom" combined with mobile workers, leadership willing to go where the tax savings really are astronomical for them, and critical mass in some of the relocation cities for certain groups makes some of these places like Austin, Atlanta, and Knoxville more palatable.

For the OP, waiting and then leasing the land to someone building an office park may be the equivalent of the endowment for Cooper Union in NYC. The gift that keeps giving to your Grandchildren or Great Grandchildren.
I really agree...getting it developed in some way to get lease revenue rather than subdividing for houses seems ideal.
new2bogle
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by new2bogle »

a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
Starter house in Austin 12 years ago was $250k for 3000 sq ft, brand spanking new.

Similar new house is ~$800k + 2.5% property tax.

Austin is not cheap.
inverter
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by inverter »

Could you roll your equity from the land into a future development? Keep the diversification but capture some upside.
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gr7070
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by gr7070 »

ef11 wrote: Fri Oct 02, 2020 6:29 am one Trust sold land last year for $176,000/acre for retail development
If that price per acre is not a typo (sounds crazy high, but location unspecified) your current offer of 17k per acre might have potential for huge increase.

I would take slow, deliberate action to engage informed professionals who might be able to help determine how far and how fast values might rise in the next 5-10 years.

You might be giving away significant growth. Obviously, no one has a crystal ball; but I'd put forth some reasonable effort (and likely a little cash) to get a real, informed professional projection.

Aside: addressing all the love for Austin...
I don't get it. I like Austin plenty - it is definitely a very nice place to live. I'm not leaving anytime soon. However, with the very hot temps, no ocean, and no mountains there are many better metro areas around the country.
I've had the following conversation more than once: "Oh, your from Austin? I absolutely *love* Austin! It's the best! I can't wait to finally visit there!"
Seriously, they love Austin, know it's incredible, but have never even set foot here???
Topic Author
ef11
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by ef11 »

petulant wrote: Fri Oct 02, 2020 7:19 am Can you enter an agreement with developers that does not involve sale for all of the land, by keeping rights over major corners and/or other parts that would be ideal for commercial? You could then keep commercial and work with a developer for NNN-type revenue. Might be able to use the sale of part of the land for residential purposes to pay for buildings on commercial part.

Can you 1031 exchange it for different raw land further out from Austin? You may be able to buy a lot more land and not pay any income tax.
Not a bad idea. To be clear, the current location is not ideal for commercial as it is on a two-lane county road with fairly low traffic. It is east of Highway 130. Just because it isn't ideal for commercial now doesn't mean it may not be in ten years which is what I think you may be getting at, but for right now certainly not ideal for commercial.

I would assume we could 1031 exchange it, but honestly not what we are looking to do. We do not live in the area and land development is not something we are passionate about or good at. So really the only options we are weighing is holding it vs. selling it for cash to invest at our desired Asset Allocation.
a_movable_life wrote: Fri Oct 02, 2020 8:28 am For the OP, waiting and then leasing the land to someone building an office park may be the equivalent of the endowment for Cooper Union in NYC. The gift that keeps giving to your Grandchildren or Great Grandchildren.
Yes in an ideal world we could do that, but there are thousands of acres of farmland still in this area...people will sell over time and the land will appreciate, but no developer is out there right now building large office parks within two miles and leasing them out. Even if they were, this is not something we would likely take on ourselves to be honest.
petulant wrote: Fri Oct 02, 2020 9:48 am I really agree...getting it developed in some way to get lease revenue rather than subdividing for houses seems ideal.
To be clear, we would not be subdividing it ourselves, just selling to a developer to then later do that. I'll post a rough location so you all can see where it is roughly, no development like that going on currently.
inverter wrote: Fri Oct 02, 2020 9:57 am Could you roll your equity from the land into a future development? Keep the diversification but capture some upside.
Not something we are open to at this point, we don't have the expertise to do this. We would rather wait on the appreciation OR invest the money in the equity markets.
gr7070 wrote: Fri Oct 02, 2020 10:21 am If that price per acre is not a typo (sounds crazy high, but location unspecified) your current offer of 17k per acre might have potential for huge increase.

I would take slow, deliberate action to engage informed professionals who might be able to help determine how far and how fast values might rise in the next 5-10 years.

You might be giving away significant growth. Obviously, no one has a crystal ball; but I'd put forth some reasonable effort (and likely a little cash) to get a real, informed professional projection.
That price is not a typo, that land was sold on Toll 130 for a large commercial development. It is 3-5 miles from our land, and we are not on 130 of course. But yes, those type of numbers make us weary to want to sell currently.

Do you have any recommendations as to the type of professionals we could reach out to? We are trying to not give away significant growth, that is what all of this deliberation is about at the end of the day.

If you want to look on a map, go to Toll 130 where it intersects Pecan Street. Coordinates 30.424536, -97.585786 Our land is 3-4 miles east of that.
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Watty
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by Watty »

ef11 wrote: Fri Oct 02, 2020 6:29 am Have a situation I would like some peer opinions on to ensure we are not missing anything in our analysis.
.....
Appraised value is over $2 MM and any gains would be long-term.
.....
Our extended family owns many different tracts of land in this area....
It sounds like diversification would be a factor to consider.

Could you do a 1031 real estate exchange to buy some other sort of investment property, possibly in a different part of the country? That might give you a way to get some more diversification and avoid, or at least delay, paying the capital gains taxes. Some other sort of investment property might also generate more income.

I don't have a clue about what a fair price might be or if now is a good time to sell.
Reamus294
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by Reamus294 »

If I was wanting diversification and had no short-term need for the money I'd hold it. Austin has been growing quickly which is concerning, but I think Austin is pretty well diversified itself with different industries although it is growing tech heavy. It handled the last housing bubble well, which was a good test in my books.

I would generate some sort of plan with the others about what you think is a low, medium, high number even if they are guesses at this point. This may also help keep future expectations aligned.
stan1
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by stan1 »

Since it is a windfall with low carrying costs and you don't need the money I'd ride it awhile longer unless you feel like it is a nusiance or burden to manage. It does have to be managed as an active business. You'd want to be monitoring nearby property sales and land use and local politics. There's always a risk that the city will put in a garbage truck depot on adjacent land.
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gr7070
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by gr7070 »

ef11 wrote: Fri Oct 02, 2020 12:37 pm
gr7070 wrote: Fri Oct 02, 2020 10:21 am I would take slow, deliberate action to engage informed professionals who might be able to help determine how far and how fast values might rise in the next 5-10 years.

You might be giving away significant growth. Obviously, no one has a crystal ball; but I'd put forth some reasonable effort (and likely a little cash) to get a real, informed professional projection.
But yes, those type of numbers make us weary to want to sell currently.

Do you have any recommendations as to the type of professionals we could reach out to? We are trying to not give away significant growth, that is what all of this deliberation is about at the end of the day.
I do not. I'm not a commercial investor and just oh so barely a residential property investor, and even then not in Austin.

But that's where the slow deliberate steps come in.

If I had a $2M property I'd start networking. Start with whoever was involved in the mega deal on SH130. Talk with your appraiser.

Talk to investment realtors, Bigger Pockets might have some thoughts, contact a couple lenders I know, a couple entrepreneurs I know, couple wealth managers I know, my buddy who develops property in Park City, local investment clubs, on and on.

The 30 year olds might have only run into a couple of these folks, and the 70 year old should know plenty; and from there the network grows.

I'd start reaching out for info, names of someone who might know proper professionals. It's going to take time to grow your network, educate yourself before you can know enough of who really to talk to and what questions to ask.

It's going to take some time. Time you have. Congrats and good luck.
Tingting1013
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by Tingting1013 »

a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
It is more accurate to say that moving from SF to Austin would:

1. Zero out your state income taxes
2. Likely have no change to your property taxes
3. Likely lower your mid-six figure salary by at least 15%

In the end you probably come out ahead but not by as much as you might think.
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gr7070
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by gr7070 »

Tingting1013 wrote: Fri Oct 02, 2020 3:09 pm
a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
It is more accurate to say that moving from SF to Austin would:

1. Zero out your state income taxes
2. Likely have no change to your property taxes
3. Likely lower your mid-six figure salary by at least 15%

In the end you probably come out ahead but not by as much as you might think.
And lose the ocean and moderate temps. And lose close access to mountains and forests.
Though you'd gain kolaches?
; )
srt7
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by srt7 »

gr7070 wrote: Fri Oct 02, 2020 10:21 am
ef11 wrote: Fri Oct 02, 2020 6:29 am one Trust sold land last year for $176,000/acre for retail development
If that price per acre is not a typo (sounds crazy high, but location unspecified) your current offer of 17k per acre might have potential for huge increase.

I would take slow, deliberate action to engage informed professionals who might be able to help determine how far and how fast values might rise in the next 5-10 years.

You might be giving away significant growth. Obviously, no one has a crystal ball; but I'd put forth some reasonable effort (and likely a little cash) to get a real, informed professional projection.

Aside: addressing all the love for Austin...
I don't get it. I like Austin plenty - it is definitely a very nice place to live. I'm not leaving anytime soon. However, with the very hot temps, no ocean, and no mountains there are many better metro areas around the country.
I've had the following conversation more than once: "Oh, your from Austin? I absolutely *love* Austin! It's the best! I can't wait to finally visit there!"
Seriously, they love Austin, know it's incredible, but have never even set foot here???
Such is the power of Austin's marketing wing!! :sharebeer
petulant
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by petulant »

I would hold until you have clear options for lease-revenue-based investment.
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by celia »

ef11 wrote: Do you have any recommendations as to the type of professionals we could reach out to? We are trying to not give away significant growth, that is what all of this deliberation is about at the end of the day.
If you have the time and interest, see if there are any urban planning courses online. Even though that may not be a direct link for you, someone else in the class might know of useful contacts. And even the class itself will likely present ideas you never thought of.
dkb140
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by dkb140 »

ef11 wrote: Fri Oct 02, 2020 6:29 am Hello Fellow Bogleheads,

Have a situation I would like some peer opinions on to ensure we are not missing anything in our analysis.

My family has had a tract of land in our family for over 100 years, just outside of Austin, TX. It is ~120 acres, Ag-exempt, we have a small company that pays us to farm the land each year as well as wildlife management being done on the property, so annual taxes and expenses are very low. Land has one small county road that runs by it, about 1,600 feet of land is adjacent to that road with the rest being surrounded by other farm land. Most of the area around us for 1-2 miles is still farm land, so businesses and houses and high traffic flow is not right by our land, but likely will be in the next 10-15 years. Appraised value is over $2 MM and any gains would be long-term. It is owned by an LLC that is owned by three family members, including myself. Our ages are ~70, 30, and 30.

If you want to look on a map, go to Toll 130 where it intersects Pecan Street. Coordinates 30.424536, -97.585786 Our land is 3-4 miles east of that. I know it's not as "Austin" as you all were probably thinking but figured most would not know this location well.

The area is growing quickly, utilities are being brought right by our land, Amazon is building a distribution center 3 miles away. Warehousing/business is moving towards our land from the west and housing developments are being developed towards our land from the east and the south. Our extended family owns many different tracts of land in this area, and one Trust sold land last year for $176,000/acre for retail development (owners of the LLC discussed received < 10% of the proceeds).

Only negatives we see about the property at this time are that about 50 acres is considered to be in the floodplain. Home developers typically seem to like some access to water so hasn't deterred them to this point. In the city's 2030 plans, they show a potential road dividing our land, but of course if a development is built that wouldn't be the case.

We have an offer in hand for $2 MM on the property and also have a privately held and publicly held company in discussions with us and we anticipate higher offers from them based on our initial discussion. The current offer and the public company have plans for single-family home development. The private company (family owned) has said they want to buy and hold for the long-term with no near-term development plans.

The three owners of the LLC have combined taxable investments accounts of over $5 MM and really have no need for the money today. Our lives would not change at all by selling the land now.

We feel the fact that we already have so much money invested in the equity markets, that the land provides us good diversification. What if we were to sell and then go through another "lost decade", we would feel foolish to have all of our eggs in one basket - the global equity markets. But what if we get an offer for $3 MM or $4 MM? If we could go back in time and get the money in March of 2020 I think we would do it in a heartbeat, hindsight is nice ha. But with markets already having recovered It's hard to imagine dumping the proceeds into the market and hoping the next 10 years is even close to the returns of the last 10 years.

Just a lot to weigh and the biggest financial decision of our lives, so would like any input from anyone that has any thoughts or has even been through a similar situation.
my thoughts: if nearby land went for $176k/acre, your $16.7k/ acre offer seems very low. Since you don't need the money I'd reject that offer, especially if the LLC is cashflow-positive. I'd just watch for opportunities to develop or lease out parcels and increase the LLC income.
medic
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by medic »

a_movable_life wrote: Fri Oct 02, 2020 7:33 am I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.
Having gone to school/lived/worked in all three locations. Austin is NOT SFO/NYC. Young, vibrant locale, good nightlife, bit more left leaning politics (for Texas), but no pro sports, difficult travel options, limited arts culture, limited cuisine choices (though some darn good BBQ and TexMex).

Will agree, lots of tech bros. If anything, I'd say it's a Tier 2 tech city, more like Seattle and maybe Boulder area but with a lot less rain. No income tax in Washington either :)
Onlineid3089
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by Onlineid3089 »

new2bogle wrote: Fri Oct 02, 2020 9:54 am
a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
Starter house in Austin 12 years ago was $250k for 3000 sq ft, brand spanking new.

Similar new house is ~$800k + 2.5% property tax.

Austin is not cheap.
3000 sq ft starter house :shock:
Broken Man 1999
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by Broken Man 1999 »

If this were me, I would do something soon. Sometimes it seems progressive areas become less enthused about permitting housing, and other type structures. How Austin will pan out, who knows. I don't think there is a strong reason to think Austin won't go down the same road as other cities have done.

Overall Texas has been OK with sprawl, Houston comes to mind. But, Houston is not Austin.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
enclee
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by enclee »

I’m just up 130 a bit from your property, and I wouldn’t sell yet. If, you don’t need the money then just keep holding it. You’ve seen the sprawl encompass Pflugerville, Hutto, Taylor.
BillyK
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by BillyK »

Eff wrote: That price is not a typo, that land was sold on Toll 130 for a large commercial development. It is 3-5 miles from our land, and we are not on 130 of course. But yes, those type of numbers make us weary to want to sell currently.

Do you have any recommendations as to the type of professionals we could reach out to? We are trying to not give away significant growth, that is what all of this deliberation is about at the end of the day.

If you want to look on a map, go to Toll 130 where it intersects Pecan Street. Coordinates 30.424536, -97.585786 Our land is 3-4 miles east of that.
Regarding making a decision with your current land, I wouldn't even consider the price per acre sale of a property along the corner of SH 130 and Pecan Street in Pflugerville. That property is in a prime commercial location along the SH 130 corridor. As you may be aware, investors and developers were making offers to the landowners on the good SH 130 intersection corner tracts or near corner ones from the time its plans first became available in 2002 or so. SH 130 is an access controlled highway facility and its frontage roads are limited. Many of its crossroads don't have on/off ramp access or frontage roads.

As per your coordinates, I am well familiar with that particular location and property. It is probably one of the better corners along the full +/- 88 mile SH 130 length from Georgetown south to Seguin. SH 130 positively impacted property's value in a unique way which isn't typical of most real estate.
palanzo
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by palanzo »

gr7070 wrote: Fri Oct 02, 2020 3:14 pm
Tingting1013 wrote: Fri Oct 02, 2020 3:09 pm
a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
It is more accurate to say that moving from SF to Austin would:

1. Zero out your state income taxes
2. Likely have no change to your property taxes
3. Likely lower your mid-six figure salary by at least 15%

In the end you probably come out ahead but not by as much as you might think.
And lose the ocean and moderate temps. And lose close access to mountains and forests.
Though you'd gain kolaches?
; )
Ahh yes those sweet cool ocean breezes mixed with an annual 3.4 million acres (so far in 2020) of wildfires accompanied by the worst air quality in the world.
Topic Author
ef11
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by ef11 »

Watty wrote: Fri Oct 02, 2020 12:51 pm
ef11 wrote: Fri Oct 02, 2020 6:29 am Have a situation I would like some peer opinions on to ensure we are not missing anything in our analysis.
.....
Appraised value is over $2 MM and any gains would be long-term.
.....
Our extended family owns many different tracts of land in this area....
It sounds like diversification would be a factor to consider.

Could you do a 1031 real estate exchange to buy some other sort of investment property, possibly in a different part of the country? That might give you a way to get some more diversification and avoid, or at least delay, paying the capital gains taxes. Some other sort of investment property might also generate more income.

I don't have a clue about what a fair price might be or if now is a good time to sell.
To clarify, extended family does not mean any of that money will flow to the owners of our LLC. We only have this single plot of land that has any financial impact to the three of us. The land in the Trust that was mentioned was a one-time situation.
stan1 wrote: Fri Oct 02, 2020 2:28 pm Since it is a windfall with low carrying costs and you don't need the money I'd ride it awhile longer unless you feel like it is a nusiance or burden to manage. It does have to be managed as an active business. You'd want to be monitoring nearby property sales and land use and local politics. There's always a risk that the city will put in a garbage truck depot on adjacent land.
All valid points for sure. We like the fact that Amazon is coming in within 3 miles of our location (close to the coordinates I posted)
gr7070 wrote: Fri Oct 02, 2020 3:01 pm
ef11 wrote: Fri Oct 02, 2020 12:37 pm
gr7070 wrote: Fri Oct 02, 2020 10:21 am I would take slow, deliberate action to engage informed professionals who might be able to help determine how far and how fast values might rise in the next 5-10 years.

You might be giving away significant growth. Obviously, no one has a crystal ball; but I'd put forth some reasonable effort (and likely a little cash) to get a real, informed professional projection.
But yes, those type of numbers make us weary to want to sell currently.

Do you have any recommendations as to the type of professionals we could reach out to? We are trying to not give away significant growth, that is what all of this deliberation is about at the end of the day.
I do not. I'm not a commercial investor and just oh so barely a residential property investor, and even then not in Austin.

But that's where the slow deliberate steps come in.

If I had a $2M property I'd start networking. Start with whoever was involved in the mega deal on SH130. Talk with your appraiser.

Talk to investment realtors, Bigger Pockets might have some thoughts, contact a couple lenders I know, a couple entrepreneurs I know, couple wealth managers I know, my buddy who develops property in Park City, local investment clubs, on and on.

The 30 year olds might have only run into a couple of these folks, and the 70 year old should know plenty; and from there the network grows.

I'd start reaching out for info, names of someone who might know proper professionals. It's going to take time to grow your network, educate yourself before you can know enough of who really to talk to and what questions to ask.

It's going to take some time. Time you have. Congrats and good luck.
This would be great, but to be honest we are all simply too busy and do not live in the area of the land. We live in Texas, but not close by. And the 30 year olds have bustling careers and the 70 year old is not interested in this type of activity.
petulant wrote: Fri Oct 02, 2020 3:59 pm I would hold until you have clear options for lease-revenue-based investment.
Yes, I assume you mean own the property with commercial/retail type buildings on it, generating $500,000 in lease revenue per year, and then try to sell it at a 10 X or something of that nature. We would have to put up the money to build it out though, which I don't see us doing. I see a lot of that going on with people from California moving to my town and paying large multiples based on lease revenue. BUT, in our area I don't see that happening anytime soon. There is land in all directions as far as the eye can see and only small county roads right now.
enclee wrote: Fri Oct 02, 2020 7:23 pm I’m just up 130 a bit from your property, and I wouldn’t sell yet. If, you don’t need the money then just keep holding it. You’ve seen the sprawl encompass Pflugerville, Hutto, Taylor.
Good to know, thank you for the feedback. And yes the sprawl has certainly been happening quickly.
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not4me
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by not4me »

There are several aspects to this, but I think you have a reasonable handle on it. I’d perhaps approach a bit differently though. I would start with a decision on whether this is a good time to “break up the llc”. I’m assuming the 3 partners inherited somehow equal shares of this 1 tract? Otherwise, how were the 3 brought together? It would also be pertinent to know if the 2 younger partners stand to solely inherit the entire share of the 3rd partner when 3rd partner dies. If so, that seems to be more straight forward than other possibilities. Else, there will new new dynamics enter into the decision making. There are usually nonfinancial hurdles on selling such tracts. How long has the llc been going? Based on age on younger ones, probably mostly during basically good times.

Joint ownership of real estate – especially with relatives – can be difficult regardless of how well the partners get along in good times. Time has a way of causing objectives to diverge. Health matters, paying for college, marital/legal/career setbacks, etc can lead to one partner needing liquidity more than the others. Jobs may be busy now, but that is more likely to increase than decrease for the 30 year olds.

It sounds as if this 1 tract is 30+% of taxable investments, no doubt unevenly spread. But, it isn’t a liquid asset & timing of getting out isn’t always at the choice of the owner. You don’t have control of when the chance to sell will arise & real estate (yes, even in Austin) markets can also hit slumps for periods of time. It has given you diversification as farmland. Ironically, going forward it likely won’t be sold as farmland but either housing or commercial. That will make it less of a diversifier (imo, no data to support) compared to economy/equities.

Per acre comparisons are usually unfair as all real estate is different. The same reasons you aren’t eager to develop this yourself are reasons why a buyer likely won’t pay as much today for undeveloped land with uncertainty. It will undoubtedly be worth more later than today. It may be that one of these other buyers is a front for accumulating several tracts for a bigger project. As other farms sell, that will also affect your tract. Advantages & disadvantages to being on early or late side of that trend. Question is whether collectively that price increase is sufficient incentive for you to hold, in light of the various unknowns & uncontrollables.

Clearly, you want to maximize what you sell for & I don't recall mention of professional help. How are these offers finding you? Do you have pro giving advice? If you sell, I’d say don’t ever look back. If you don’t sell, I’d say take the time to write down for collective group ‘why’ you held & any future exit criteria. This might be valuable as well should something happen to one of the 3.

Finally, I wouldn’t decide whether to sell based on current expectations of equity/debt market. Can’t optimize selling at top of real estate market & bottom of equity market. Particularly for 30 year olds, you have long time horizons. You can average the lump sum in if you choose. It would affect your taxes & risk profile & does need attention.

Good luck in your collective decision & congrats on having a “good” problem!
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by ef11 »

not4me wrote: Sat Oct 03, 2020 7:41 am There are several aspects to this, but I think you have a reasonable handle on it. I’d perhaps approach a bit differently though. I would start with a decision on whether this is a good time to “break up the llc”. I’m assuming the 3 partners inherited somehow equal shares of this 1 tract? Otherwise, how were the 3 brought together? It would also be pertinent to know if the 2 younger partners stand to solely inherit the entire share of the 3rd partner when 3rd partner dies. If so, that seems to be more straight forward than other possibilities. Else, there will new new dynamics enter into the decision making. There are usually nonfinancial hurdles on selling such tracts. How long has the llc been going? Based on age on younger ones, probably mostly during basically good times.

The 3 partners are aunt and two nephews (I'm one of the nephews). It was inherited from our grandparents, 50% to aunt and 25% each to the nephews. Supermajority is required on any decisions to sell, so has to be Aunt + one nephew. We are at different stages of our lives of course, Aunt is more willing to sell at ~$2 MM+ price than the nephews, but is accepting that if we don't want to sell we won't.

The two younger partners do stand to solely inherit the entire share of the Aunt, as dictated by our documents that the land, if not sold, must stay within our family's bloodline. LLC has been active for a few years.

Joint ownership of real estate – especially with relatives – can be difficult regardless of how well the partners get along in good times. Time has a way of causing objectives to diverge. Health matters, paying for college, marital/legal/career setbacks, etc can lead to one partner needing liquidity more than the others. Jobs may be busy now, but that is more likely to increase than decrease for the 30 year olds.

I certainly see your point in most instances, but we all have 7 figure liquid assets at this time so immediate need for liquidity from the land would be very unlikely.

It sounds as if this 1 tract is 30+% of taxable investments, no doubt unevenly spread. But, it isn’t a liquid asset & timing of getting out isn’t always at the choice of the owner. You don’t have control of when the chance to sell will arise & real estate (yes, even in Austin) markets can also hit slumps for periods of time. It has given you diversification as farmland. Ironically, going forward it likely won’t be sold as farmland but either housing or commercial. That will make it less of a diversifier (imo, no data to support) compared to economy/equities.

Agree with everything in this paragraph.

Per acre comparisons are usually unfair as all real estate is different. The same reasons you aren’t eager to develop this yourself are reasons why a buyer likely won’t pay as much today for undeveloped land with uncertainty. It will undoubtedly be worth more later than today. It may be that one of these other buyers is a front for accumulating several tracts for a bigger project. As other farms sell, that will also affect your tract. Advantages & disadvantages to being on early or late side of that trend. Question is whether collectively that price increase is sufficient incentive for you to hold, in light of the various unknowns & uncontrollables.

Agreed. All potential buyers are contacting our neighbors as well (we have extended family ties to them all as most have had the land in the family for 100+ years) and stating they are looking to buy multiple tracks but will purchase a single tract even if adjoining owners don't sell. Two of the companies are interested in single-family homes developing it out with 0.20 acre lots $300,000 price homes. One has said they simply want to buy and hold for appreciation with no near term development plans (not sure why they would say this to us..."we know your land is going up in price and we want to buy it so we get the gains with no work..." not going to entice us to want to sell now! We understand being early or later may have pros and cons, can you provide any that you can think of?

Clearly, you want to maximize what you sell for & I don't recall mention of professional help. How are these offers finding you? Do you have pro giving advice? If you sell, I’d say don’t ever look back. If you don’t sell, I’d say take the time to write down for collective group ‘why’ you held & any future exit criteria. This might be valuable as well should something happen to one of the 3.

These offers are finding us by land acquisition managers for the companies reaching out to us directly. No use of a realtor at this time and would rather pay a true expert to help us rather than paying a realtor a large amount in % terms. Not saying a realtor can't be an expert, but I think we could find others more knowledgeable on maximizing value. You're 100% right, hindsight is 20/20 and we can't beat ourselves up one way or another. I'll tell you, I'm not the best at preventing myself from doing this ha. Good point on writing down why we made the decisions we made and future criteria for an exit.

Finally, I wouldn’t decide whether to sell based on current expectations of equity/debt market. Can’t optimize selling at top of real estate market & bottom of equity market. Particularly for 30 year olds, you have long time horizons. You can average the lump sum in if you choose. It would affect your taxes & risk profile & does need attention.

Yes, very true. Appraised value is over any current offer we have right now, so tax liability would be minimal at the current prices.

Good luck in your collective decision & congrats on having a “good” problem!

Thank you!!
Thank you so much for your very insightful response. I will add comments to your post above in RED
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MBB_Boy
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by MBB_Boy »

a_movable_life wrote: Fri Oct 02, 2020 8:28 am
MBB_Boy wrote: Fri Oct 02, 2020 8:12 am
a_movable_life wrote: Fri Oct 02, 2020 7:33 am I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes.
:annoyed

Love,
A local native
CA, NY, NJ, MA, MD have the issue of being on the wrong side of a "Race to the bottom" combined with mobile workers, leadership willing to go where the tax savings really are astronomical for them, and critical mass in some of the relocation cities for certain groups makes some of these places like Austin, Atlanta, and Knoxville more palatable.

For the OP, waiting and then leasing the land to someone building an office park may be the equivalent of the endowment for Cooper Union in NYC. The gift that keeps giving to your Grandchildren or Great Grandchildren.
I'm more reacting to being compared to NYC or SFO. Those places suck (to me) and I want nothing to do with them.

To OP, you have potentially a lot to gain by waiting, and seemingly little to gain by going forward now (don't need the money). I would be looking for options to maintain flexibility
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by 8foot7 »

If you don't need the money now and a transaction valued at 10x per just happened in the near vicinity, I'd be holding out.
With that said, if your portion of the $2 million is that last straw, that last piece of the the puzzle that would enable you to be financially independent/quit work/change your life, and that sort of change is something you want right now, I might look at ways of executing on it. Your other partners might be willing to buy you out. (In other words, I wouldn't turn down this money and keep working at a job I didn't love for 10 years hoping for a big payday.)
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by Nestegg_User »

remember that if you don't stay within bloodlines (as you said you would if you kept it) that the water rights go to the state. You also mentioned upthread that there was currently planning for a road through the property in the 2030 planning process; that might affect your ability to sell your property, and certainly the valuation of it, in future years. Therefore, if you are going to sell or exchange the property you would want to do it earlier to avoid future restrictions that might be placed on it.

I would agree that a 1031 might be appropriate, especially if a separate property could be established for each party so that future concerns could be minimized (re, inheritance, earlier sale of interest by one partner, etc)

[aunt and cousins have ~160 acres in south TX, mostly dry farming, that also has been in their family over 100 years]
not4me
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by not4me »

ef11 wrote: Sat Oct 03, 2020 9:06 am
We understand being early or later may have pros and cons, can you provide any that you can think of?
Briefly, on the development side...if this unfolds as often does, there will be ups & downs from the initial development until last farm is sold. Uncertainty will be highest now, but as local regs (zoning, et al) work thru, infrastructure happens, local economy booms or busts, gets too crowded for traffic, or whatever...pool of possible buyers & expectations of sellers will shift.

On the farmland side though...this may be more subtle. Farming has become a volume business for a variety of reasons that I won't go into. As farms sell, there may be an initial surge of competition from those trying to rent farmland (less supply of land, same number of renters) & good for landowners. But at some point, the suppliers to the farmers will not have enough business to hang around. Equipment companies, seed coops, et al won't have enough business....leaving those still farming to have higher costs & less profit (bad for landowners). So, then they drop out....Worst case for last land standing...no one around to work it, taxed as non-ag, but demand for development has dried up. Long way from now & no way would I guess how quickly that'll happen. Early on, a economic development pro might help navigate this specific.

btw, not to delve too deeply & you may choose not to go down this road any further...I could read it that if the aunt sells, then proceeds might go to someone else upon her death. If she holds, then might the nephews inherit her share with a revised basis? (assuming of course the tax laws regarding cap gains stay as they are) This might setup a bit of conflict potentially
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by Hulu »

Sounds like you’re getting paid well to wait. Without a lot of time/hassle/work. I’d just put a sign up, come up with an astronomical sell price in your mind and enjoy.

When you’re interested in selling I’d be interested in buying.

Good luck 🍀
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by TxAg »

I didn't read all the replies. I know that area. It's booming.

If you don't need the money now, hold out for some life changing money.
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by KyleAAA »

new2bogle wrote: Fri Oct 02, 2020 9:54 am
a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
Starter house in Austin 12 years ago was $250k for 3000 sq ft, brand spanking new.

Similar new house is ~$800k + 2.5% property tax.

Austin is not cheap.
It is if you make $300k and have a spouse who earns 6 figures as well. Seattle is still far and away the choice of techies who don't want to live in the bay area over Austin, though. A 3000 sq ft house isn't a starter house by any definition I've ever heard. $800k for 3000 sq ft is EXTREMELY cheap for somebody coming from the bay area.
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by sergeant »

KyleAAA wrote: Sat Oct 03, 2020 11:19 am
new2bogle wrote: Fri Oct 02, 2020 9:54 am
a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
Starter house in Austin 12 years ago was $250k for 3000 sq ft, brand spanking new.

Similar new house is ~$800k + 2.5% property tax.

Austin is not cheap.
It is if you make $300k and have a spouse who earns 6 figures as well. Seattle is still far and away the choice of techies who don't want to live in the bay area over Austin, though. A 3000 sq ft house isn't a starter house by any definition I've ever heard. $800k for 3000 sq ft is EXTREMELY cheap for somebody coming from the bay area.
800k for a 3000 sq ft home may be cheap but property taxes in some Austin areas like Lakeway/Rough Hollow would run you 24k a year.
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by bmelikia »

ef11 wrote: Fri Oct 02, 2020 6:29 am We have an offer in hand for $2 MM on the property and also have a privately held and publicly held company in discussions with us and we anticipate higher offers from them based on our initial discussion. The current offer and the public company have plans for single-family home development. The private company (family owned) has said they want to buy and hold for the long-term with no near-term development plans.
If they offered you $2 MM, and if that was their first offer, then even if you want to consider selling to them I would NOT sell for that price.
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by stan1 »

It's a very speculative investment (even in Austin). Vacant land will be very cyclical. If you are willing and able to wait 30-50 years or even plan to leave it to your heirs may as well just keep it. Land is often sold multiple times as it goes through entitlement process. A home builder such as KB these days will generally only buy land that is fully entitled.

You seem enthusiastic about this so maybe this becomes a side gig or even a full time job at some point helping your family manage this property and others they own.

If you get really lucky they will build an outer north/south toll road parallel to 130 and looks like they are making at least half an attempt to preserve right of way along 290 to extend toll road. They did not preserve right of way to extend 45 directly east which might have helped you out the most.
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by celia »

ef11 wrote: Sat Oct 03, 2020 9:06 am
not4me wrote: Sat Oct 03, 2020 7:41 am I’d perhaps approach a bit differently though. I would start with a decision on whether this is a good time to “break up the llc”. I’m assuming the 3 partners inherited somehow equal shares of this 1 tract? Otherwise, how were the 3 brought together? It would also be pertinent to know if the 2 younger partners stand to solely inherit the entire share of the 3rd partner when 3rd partner dies...
The 3 partners are aunt and two nephews (I'm one of the nephews). It was inherited from our grandparents, 50% to aunt and 25% each to the nephews. Supermajority is required on any decisions to sell, so has to be Aunt + one nephew. We are at different stages of our lives of course, Aunt is more willing to sell at ~$2 MM+ price than the nephews, but is accepting that if we don't want to sell we won't.

The two younger partners do stand to solely inherit the entire share of the Aunt, as dictated by our documents that the land, if not sold, must stay within our family's bloodline. LLC has been active for a few years.
Joint ownership of real estate – especially with relatives – can be difficult regardless of how well the partners get along in good times. Time has a way of causing objectives to diverge. Health matters, paying for college, marital/legal/career setbacks, etc can lead to one partner needing liquidity more than the others. Jobs may be busy now, but that is more likely to increase than decrease for the 30 year olds.
Since everyone doesn’t hold equal shares, the relationship issue becomes more important. If the aunt has any descendants, they will apparently lose out when the aunt dies and the nephew’s shares are doubled. It is only a ‘wash’ if the nephews are her only relatives, since things will turn out the same, unless one of them dies before the aunt.

I assume you and the other nephew had a parent die that enabled you to become part owners. But what if aunt had died before the grandparents and the deceased parent(s)? The luck (‘un-luck’???) of death order appears to be the primary factor in how things came to be. So if there are other relatives who could have just as easily been in the current LLC, the ‘fair’ thing, in my opinion, is to sell now for the best price you can get.

If you don’t, I see this as the ‘last man standing’ will get it all.
These offers are finding us by land acquisition managers for the companies reaching out to us directly. No use of a realtor at this time and would rather pay a true expert to help us rather than paying a realtor a large amount in % terms...
Sounds like you want to find a land acquisition manager to represent the LLC.
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by Lalamimi »

Real Estate follows Oil and Gas I was always told. I worked in oil and gas... We bought 10 acres in Driftwood in 1999 for $62K. Built a house for about $200K in 2004. Decided not to retire there and sold 2 yrs ago for $630K. I would hang on to it a few more years unless you think there is a possibility a portion will be condemned for the road you mention. Austin/Hill Country is a crazy priced area. Loved Driftwood, but mainly because we had easy access to the other towns, not Austin. But we are in our 60s and never got "it" about the city.
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Re: Potential Family Land Sale - 120 Acres Austin, TX

Post by KyleAAA »

sergeant wrote: Sat Oct 03, 2020 12:15 pm
KyleAAA wrote: Sat Oct 03, 2020 11:19 am
new2bogle wrote: Fri Oct 02, 2020 9:54 am
a_movable_life wrote: Fri Oct 02, 2020 7:33 am " Your description tells the story that the current value is really nothing compared to what it will be soon."

I came here to say this. Austin has been and will continue to grow. It's basically SFO or NYC for cool young tech people without income taxes. Plus houses are not 1M+ for a starter home.

I'm on a different board where many of these tech people are making 200K out of school, 400-500K like we see some of the posts around here in their 30's and 40's. That move saves them tens of thousands of dollars in income tax every year as compared to other states.
Starter house in Austin 12 years ago was $250k for 3000 sq ft, brand spanking new.

Similar new house is ~$800k + 2.5% property tax.

Austin is not cheap.
It is if you make $300k and have a spouse who earns 6 figures as well. Seattle is still far and away the choice of techies who don't want to live in the bay area over Austin, though. A 3000 sq ft house isn't a starter house by any definition I've ever heard. $800k for 3000 sq ft is EXTREMELY cheap for somebody coming from the bay area.
800k for a 3000 sq ft home may be cheap but property taxes in some Austin areas like Lakeway/Rough Hollow would run you 24k a year.
Which would still put you FAR ahead of where the same household would be in California. That house would be over $2mm within a reasonable commute area and you'd pay much more than $24k in combined income and property taxes.
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gwe67
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Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by gwe67 »

This land is not really Austin, but between Manor and Pflugerville. It's a minimum drive of 30 minutes on toll roads to downtown Austin.

Newer single-family residential lots in Pflugerville seem to be valued at about $270,000 per acre. This is of course with all of the subdivision infrastructure (and houses) in place.

If we assume half of your 120 acres would be used for streets, drainageways, utility easements, parks, etc. then the remaining 60 acres if used for residential could be worth about $16 million in today's dollars.

The only question is how many years (decades?) will it take for the expansion of Pflugerville/Manor to reach your land?
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Topic Author
ef11
Posts: 304
Joined: Sat Mar 10, 2012 10:39 pm

Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by ef11 »

8foot7 wrote: Sat Oct 03, 2020 9:55 am If you don't need the money now and a transaction valued at 10x per just happened in the near vicinity, I'd be holding out.
With that said, if your portion of the $2 million is that last straw, that last piece of the the puzzle that would enable you to be financially independent/quit work/change your life, and that sort of change is something you want right now, I might look at ways of executing on it. Your other partners might be willing to buy you out. (In other words, I wouldn't turn down this money and keep working at a job I didn't love for 10 years hoping for a big payday.)
As others have stated, probably not appropriate to compare the 10x property as it was located right next to 130 Toll and is exploding with commercial development, but in 2-3 decades there may be a small chance our land was in a similar situation. There have been a few sales of land in our area that are more comparable to the offers we have received, but it seems not many landowners are willing to sell right now.

And yes I agree, and as stated it really isn't the last straw for any of us. It would not make a material change to any of our lives currently. We wouldn't buy new houses, change jobs, etc because of this money.
Nestegg_User wrote: Sat Oct 03, 2020 10:30 am remember that if you don't stay within bloodlines (as you said you would if you kept it) that the water rights go to the state. You also mentioned upthread that there was currently planning for a road through the property in the 2030 planning process; that might affect your ability to sell your property, and certainly the valuation of it, in future years. Therefore, if you are going to sell or exchange the property you would want to do it earlier to avoid future restrictions that might be placed on it.

I would agree that a 1031 might be appropriate, especially if a separate property could be established for each party so that future concerns could be minimized (re, inheritance, earlier sale of interest by one partner, etc)

[aunt and cousins have ~160 acres in south TX, mostly dry farming, that also has been in their family over 100 years]
Yes if we wanted to continue to own land a 1031 exchange where we each get our own property would be ideal, but really not something we are interested in. At current offer levels tax implications are non-existent (appraised value higher than offer price) so we would likely take the money and move on with no land ownership.
not4me wrote: Sat Oct 03, 2020 11:00 am
ef11 wrote: Sat Oct 03, 2020 9:06 am
We understand being early or later may have pros and cons, can you provide any that you can think of?
Briefly, on the development side...if this unfolds as often does, there will be ups & downs from the initial development until last farm is sold. Uncertainty will be highest now, but as local regs (zoning, et al) work thru, infrastructure happens, local economy booms or busts, gets too crowded for traffic, or whatever...pool of possible buyers & expectations of sellers will shift.

On the farmland side though...this may be more subtle. Farming has become a volume business for a variety of reasons that I won't go into. As farms sell, there may be an initial surge of competition from those trying to rent farmland (less supply of land, same number of renters) & good for landowners. But at some point, the suppliers to the farmers will not have enough business to hang around. Equipment companies, seed coops, et al won't have enough business....leaving those still farming to have higher costs & less profit (bad for landowners). So, then they drop out....Worst case for last land standing...no one around to work it, taxed as non-ag, but demand for development has dried up. Long way from now & no way would I guess how quickly that'll happen. Early on, a economic development pro might help navigate this specific.

btw, not to delve too deeply & you may choose not to go down this road any further...I could read it that if the aunt sells, then proceeds might go to someone else upon her death. If she holds, then might the nephews inherit her share with a revised basis? (assuming of course the tax laws regarding cap gains stay as they are) This might setup a bit of conflict potentially
This all makes sense. Yes the case you lay out about proceeds are correct. Nephews are the only heirs of the aunt so it isn't something that we are focused on in terms of a buy/sell decision.
Hulu wrote: Sat Oct 03, 2020 11:12 am Sounds like you’re getting paid well to wait. Without a lot of time/hassle/work. I’d just put a sign up, come up with an astronomical sell price in your mind and enjoy.

When you’re interested in selling I’d be interested in buying.

Good luck 🍀
Following your lead, we are ready to sell at $10 MM. PM me to complete the transaction :)
bmelikia wrote: Sat Oct 03, 2020 12:35 pm
ef11 wrote: Fri Oct 02, 2020 6:29 am We have an offer in hand for $2 MM on the property and also have a privately held and publicly held company in discussions with us and we anticipate higher offers from them based on our initial discussion. The current offer and the public company have plans for single-family home development. The private company (family owned) has said they want to buy and hold for the long-term with no near-term development plans.
If they offered you $2 MM, and if that was their first offer, then even if you want to consider selling to them I would NOT sell for that price.
Agreed, $2 MM was not their first offer, they increased from $1.5 to $2 MM after we let them know we received interest from two other companies and were not planning to make any decisions immediately.
stan1 wrote: Sat Oct 03, 2020 12:53 pm If you get really lucky they will build an outer north/south toll road parallel to 130 and looks like they are making at least half an attempt to preserve right of way along 290 to extend toll road. They did not preserve right of way to extend 45 directly east which might have helped you out the most.
Good information, I'm curious how you are aware that they are making some attempt to preserve right of way along 290? Do you just know this from driving on the road or is there some information source that seems to state this?

Looking at the map, it seems them being able to extend 45 to the east some and then south to connect to 290 could be great for our land. I guess your assumption is that because they won't extend 45 directly east that they would instead have to run another N/S toll road from 79 to 290 which could be close to our land, although it seems that road may be further away then we currently are to 130 (we are 3 miles east of 130).
celia wrote: Sat Oct 03, 2020 2:02 pm Since everyone doesn’t hold equal shares, the relationship issue becomes more important. If the aunt has any descendants, they will apparently lose out when the aunt dies and the nephew’s shares are doubled. It is only a ‘wash’ if the nephews are her only relatives, since things will turn out the same, unless one of them dies before the aunt.

I assume you and the other nephew had a parent die that enabled you to become part owners. But what if aunt had died before the grandparents and the deceased parent(s)? The luck (‘un-luck’???) of death order appears to be the primary factor in how things came to be. So if there are other relatives who could have just as easily been in the current LLC, the ‘fair’ thing, in my opinion, is to sell now for the best price you can get.

If you don’t, I see this as the ‘last man standing’ will get it all.
These offers are finding us by land acquisition managers for the companies reaching out to us directly. No use of a realtor at this time and would rather pay a true expert to help us rather than paying a realtor a large amount in % terms...
Sounds like you want to find a land acquisition manager to represent the LLC.
The aunt does not have any descendants, nephews are the only relatives. Yes a parent passed away that allowed us to become part owners. If the aunt had passed first, then the nephews would currently be 50/50 owners of the land. There are not other relatives who could have been in the LLC.
gwe67 wrote: Sat Oct 03, 2020 3:42 pm This land is not really Austin, but between Manor and Pflugerville. It's a minimum drive of 30 minutes on toll roads to downtown Austin.

Newer single-family residential lots in Pflugerville seem to be valued at about $270,000 per acre. This is of course with all of the subdivision infrastructure (and houses) in place.

If we assume half of your 120 acres would be used for streets, drainageways, utility easements, parks, etc. then the remaining 60 acres if used for residential could be worth about $16 million in today's dollars.

The only question is how many years (decades?) will it take for the expansion of Pflugerville/Manor to reach your land?
Yes you are correct, I just figured Austin in the title would be more understandable by readers than Pflugerville ha.

We walked through the economics with the developer that has made us the offer on the land. They estimate around 60 acres are developable (due to floodplain) and estimate around 250 0.20 acre lots with home price around $250,000-$300,000. You can find other developments within 2-3 miles that are selling houses just like this for this price. So your price is correct but the lot size is much smaller than you stated.

If they can fit 250 lots on the land and sell for $250,000 each, that would be $62 MM in total sale price, but there are obviously significant costs associated with getting there.

I spoke with a friend whose family develops properties just like this. They purchase the land, put in roads, utilities, etc and then sell the lots to home builders. He said they budget about $20,000 in total cost per 0.20 acre lot that they sell not including the price of the land. If the offer for $2 MM gets executed and they think they can fit 250 lots, that is $8,000 per lot in land cost putting their total cost at $28,000 per lot. They estimated lot price of $40,000 to homebuilders, meaning they would make about $12,000 in profit per lot, or $3 MM in profit. Seems like the numbers are reasonable but does seem to limit how much upside we have to get more price out of a land developer. If we sell directly to a company that develops the land AND builds the houses (the public company that contacted us does do this) then seemingly there is more profit flowing all to one company which may allow us to get more money out of them vs. the company just looking to sell lots to homebuilders.
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goos_news
Posts: 90
Joined: Mon Jun 10, 2019 7:14 pm
Location: Northern California/French Riviera

Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by goos_news »

You've gotten a lot of good info here from people who know your area (I do not). And based on what you wrote, I think you should get some independent, professional advice. I have a similar situation (Aunt + two others) in a much smaller spot of land but with a similar sized offer. Based on what I read, I would get the consultation and likely wait it out.
icdafs
Posts: 2
Joined: Sat Oct 03, 2020 6:00 pm

Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by icdafs »

Hello All, I am the Aunt and will jump in here. I really appreciate all your responses. I would be thrilled to hire someone to counsel us, as many have recommended. Unfortunately, I am wracking my brain to no avail to figure out what job title such a person might have so I can google and find someone....

I see the fact that we are what I call "Creek Locked" as the elephant in the room. [I just made up that term.]

By Creek Locked, I mean that our property is divided by a creek, so development has only one direction to go – away from the creek; stated another way, our property would be the “end” of any development. [Yes, some developers may spend the $$$ on a bridge, but neither of the 2 we are talking with have plans for that.]

Knowing that, let’s say we don’t sell to one of the developers now, but a property abutting ours does sell to one of them. What happens to us? I see 4 possibilities; I see only the Last as potentially as good or better than a bird in the hand today.

1. a DIFFERENT developer offers to buy our land to put homes on our 60 DEVELOPABLE acres. I think this is unlikely as I believe most developers would not do a project that small without expansion possibility. But even IF that happened, what incentive would THAT developer have to pay us a premium? None I can see.

2. we later give in and sell to the SAME developer as our abutting neighbor; but if that happened, what incentive would that developer have to pay us more then than they are offering us now? None I can see.

3. Pflugerville moves forward with the road across our land. Yuk, condemnation attorneys and all that mess…

4. a Commercial Developer decides our 60 acres location is appropriate for retail. That developer will still realize we are creek-locked and will not likely offer us any premium.

Factors our neighbors don't have to concern themselves with (that we do): (1) none of them are Creek Locked (2) none of them have a 2030 plan for a road dividing their property (3) none of them have acres they can't legally access [we have no access to our acres across the creek, neither road frontage nor easement] (4) none of those owners have as much floodplain as we do.

P.S. To the person who listed the negatives about Austin - even though I grew up here, I wholeheartedly agree, except - you forgot Cedar Fever!!
not4me
Posts: 895
Joined: Thu May 25, 2017 3:08 pm

Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by not4me »

icdafs wrote: Tue Oct 06, 2020 4:15 pm
Knowing that, let’s say we don’t sell to one of the developers now, but a property abutting ours does sell to one of them. What happens to us?
1st I’ll say that I don’t intend to advocate for either selling or holding; rather, trying to lend some objective thoughts that might aid in thinking this thru. IMO, all real estate is local & you are the only ones in a position to understand the unique aspects of your specific tract.

As for professional advice…as the thread has unfolded, the depth of understanding has become clearer & I would agree that you wouldn’t benefit from someone whose compensation was based on a percentage of selling price. However, its been made clear that the LLC (I’ll use that collective term for the 3 individuals, realizing it isn’t another party) doesn’t have a passion for land development. Yet, you are talking about sitting across a negotiating table from pros.

I’m not familiar with that area & these things vary by location. I would expect the local governing body (& if that is a city, maybe also county it is located in) would have an ‘economic development board’. Probably had a hand in bringing Amazon into the area. Call them & ask for their future view of the area. There is likely a ‘zoning board’. Check with them to see if they expect to throttle development, open for more than residential, etc. These may be a waste of time or give valuable insight.

As for why a future offer might include a premium….realize that if/when the land is sold, you are also selling uncertainty over the future & accompanying opportunity in the future. Price will be driven by supply & demand for the land. Demand could increase more than expected & thus price carry a premium; OR demand could dry up….

A developer who buys land adjacent to your land on the other (not currently developable by you) side of the creek might be able to develop that land (although earlier it was mentioned to be in a flood plain. If it is indeed “wetlands”, this may affect that. Still, a green space in a larger development could be a plus). In fact, depending upon that neighbor, a partnership could unlock some value. Joining forces with extended family may make the decision making harder or provide greater leverage with buyers & governing groups.

One thing that didn’t add up for me in earlier post is about the appraisal. Appraisers will take different approaches depending upon the need. Appraisals get stale if much time passes. When the land was inherited, there may have been an appraisal that gave a value for this as “farmland”, or a current use appraisal. This would set the basis for future cap gain taxes. It differs from the assessment for property tax. An appraisal might also be done for “highest and best” use, which should get into the questions regarding its potential use by using for other than farmland. $2M seems to be pricey farmland, so maybe it was this type of appraisal? I would expect that to address some of these earlier points & again a professional view. I didn’t see mention as to which type of appraisal was being quoted & wasn’t clear on the connection between the anticipated taxes & the appraisal. It seemed inconsistent to mean the land was worth less now than when appraised at time of inheritance.

Good luck – not sure you have a bad option! The 3 of you have already had a level of success & hopefully more as this unfolds.
icdafs
Posts: 2
Joined: Sat Oct 03, 2020 6:00 pm

Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by icdafs »

Thank you for your response. We will definitely consider approaching the development/zoning board(s) for Pflugerville. I live locally so could (and I'm sure should) attend public meetings. To this point I've relied on word of mouth which is how I recently discovered that Pflugerville's plan to add a 2nd sewage treatment plant one mile south of us (they purchased land for this 8 years ago) is now on an accelerated path (4 years?). Perhaps why 2 developers and 1 private individual are suddenly reaching out to us?

The appraisal was 15 months ago, for $2 million (same as our latest offer), was "best and highest use", and took took into consideration a sale of a similar-sized property across the road from us (pending at that time but later closed).
BillyK
Posts: 75
Joined: Sat Sep 24, 2016 1:30 am

Re: Potential Family Land Sale - 120 Acres Austin, TX Area

Post by BillyK »

icdafs wrote: Thank you for your response. We will definitely consider approaching the development/zoning board(s) for Pflugerville. I live locally so could (and I'm sure should) attend public meetings. To this point I've relied on word of mouth which is how I recently discovered that Pflugerville's plan to add a 2nd sewage treatment plant one mile south of us (they purchased land for this 8 years ago) is now on an accelerated path (4 years?). Perhaps why 2 developers and 1 private individual are suddenly reaching out to us?
The city has the Pflugerville 2030 Comprehensive Plan online at the following link which has I believe a lot of good information for you:

https://en.calameo.com/read/00060638986 ... ditLinks=1
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