Land Sale: Opinions Wanted

Discussion in 'Horn Depot' started by Woland, Jun 15, 2007.

  1. Woland

    Woland 500+ Posts

    I am looking for neutral opinions on when to sell some land.

    I am 46 years old, married with no children. I have co-ownership of 40 acres of timberland in Arkansas with my sister. It produces income every eight years or so. My sister, in passing, has offered to purchase my portion. I could sell now and start investing the money, or wait maybe ten years when I am closer to retirement. We can cut one more time before I retire. Four years ago it was appraised at about 10 grand an acre.

    Both my wife and I will retire with pensions. The only debt we have is less that 100, 000 on a 250,000 home. I've also got another eighteen acres just south of Denton in Argyle.

    I will greatly appreciate any feedback that anyone can give.
     
  2. tropheus

    tropheus 1,000+ Posts

    how many years before the next cut and how much will you stand to make. also, are payments made when the cut is made or is there some sort of option or payment for the future right made periodically each year, etc.

    Also, is there a better use of the property? Is that something your sister is thinking about?
     
  3. CleverNickname

    CleverNickname 500+ Posts

    I'm in love with land ownership. I think 20 x $10k could buy you a decent amount of acreage of hill country closer to where you live (probably 75ac or so within about 2 hour drive to austin, its more expensive the closer it is to town). It wouldn't be income producing, but it might be a fun thing to do in retirement. Personally I'm committed to clearing mesquite off of 36 acres for the rest of my life. Its a hobby, family bonding, and therapy all rolled into one.
     
  4. Woland

    Woland 500+ Posts

    Depending on timber prices, we are looking to cut the end of this year or next. I suppose if the weather is good for the next 10 years, we could cut again right before my retirement.

    The last time it was cut eight years ago, my mother made about 20 grand. That will now be divided between my sister and me.

    The land is in the middle of nowhere and surrounded by timberland owned by large companies, so I don't know what else it could be used for. It does have some sentimental value, having been in the family since the Louisiana Purchase. My sister is in the financial situation where it is no problem for her to hold onto the property indefinitely. Myself, I am property rich and a bit cash poor. Working in education and city government, my wife and I will not be amassing any large sums of money through our professions.

    Mostly, I think my sister just wants to help me. If I never sold the land, when I died it would go my niece anyway.
     
  5. Woland

    Woland 500+ Posts


     
  6. Bernard

    Bernard 1,000+ Posts

    If it's really worth $10k and acre and it's only pulling in $20,000 every 10 years, and you get no recreational use out of it, and it has no development potential in the forseeable future, I'd sell it in a New York minute.

    Some people are rich enough to keep $200k assets idle for decades on end. You aren't. Put the cash in a CD and you can earn 5.5% percent guaranteed by the US government. You're only making 0.5% now. If you're concerend about inflation, cash out of the land and buy a rent house or two with no debt or low debt. You'll have cash flow and a chance for appreciation. Buy some stock. Maybe a blend of CD's, a rent house and some stock.

    I'm tempted to tell you to pay off your existing mortgage, but it sounds like you're already making ends meet on your current income. The risk of paying off your current mortgage is that the monthly savings can sometimes translate into extra spending instead of extra investment. Also, if you have even the slightest concern that your marraige will EVER end in divorce, you're better off keeping your inherited assets separate from your community property. If you use inheritance to pay off debt on community property things can get cloudy later on.

    Bernard
     
  7. Woland

    Woland 500+ Posts

    Here is another question. If I sell, what will be the best way to determine a price since I am selling to a sibling?
     
  8. tropheus

    tropheus 1,000+ Posts

    I'm with bernard 100%, that's solid, solid advice. The only thing I would add is that if there is a taxable gain on the property (I don't know what your tax basis was when you inherited it), then you might consider a 1031 deferred exchange into other real estate investments to avoid the tax.

    as for the second question -- either the two of you agree on a price (knowing that depending on the price, one might get screwed by the other who did more homework on the value) or get an appraisal of your interest and split the cost.
     
  9. ryskey

    ryskey 100+ Posts

    That can get hairy. How close are you to your sister?

    My extended family owns close to 1000 acres, a lot of which is used for farming. My grandmother owns most of it and plans on having it split equally between her nine kids when she passes.

    That side of my family is very close and rarely gets into arguments. I'm constantly amazed at how such a large, close family can get along so well. The only thing that has ever caused any sort of conflict is that land. Some will want to sell and some will want to keep theirs. The source of the conflict (besides who gets what part of the property) obviously is the money aspect. Two of my uncles will want to buy some of my other aunts' and uncles' shares. Obviously, since they're family, they have to be considered the preferred buyers, but selling to someone else would be more profitable.

    It obviously won't be as messy in your case since there's only two people involved. I'm just saying it's possible for considerate, reasonable people to get into pretty heated arguments over this type of thing. My grandmother doesn't want to deal with it, so nothing has really been resolved yet.

    Anyway, good luck. I hope you and your sister can make a mutually beneficial deal without any friction, and it seems like you should based on what you've posted.
     
  10. Woland

    Woland 500+ Posts

    Thanks everyone. No matter what happens I am now far more informed. If the numbers change, I can still see what I should be balancing to make a decision.

    My sister and I will have no problem on this property as we have similar outlooks on everything. Our other property is another matter, now split between two aunts (one with children) and then my sister and me (who are on the same page, but not so much everyone else.) My sister and I have vowed that we will have it straightened out and will not leave it to my niece to sort out. I hate to think what is going to happen if we don't get it settled before my aunt's share passes to my cousins.

    Of course, you would think my mother's generation would have done better. I had a great uncle who tried to leave land to his surviving brothers and sisters, I think it was eight at the time. That was a family disaster of epic proportions.
     
  11. zzzz

    zzzz 2,500+ Posts

    It might be worth more than you think.

     
  12. bluto

    bluto 500+ Posts

    if you decide to go the rental property route, i would suggest putting the money on multiple property down payments instead of buying a couple outright.
     

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