A Bittersweet Day Here

[Spock]

We decided to sell a piece of land that has come to really mean something to us-in the interests of buying other land.

5 years ago, we made the land deal of a lifetime and bought about 114 acres of land for $365,000. It has/had about 90 acres of tillable land and about 25 acres of very attractive woods and meadow. This land is about 35 miles from the farm and is in the heart of a rapidly growing, high-amenity area.

Nobody can believe the price we bought the land for and if anybody wants to see how pretty it is-Go to Google Maps and type in "County Road 42, Prairie Road Alexandria Minnesota". Look at the satellite view and it is the long line of pine trees and meadow in the southeast corner of that intersection.

It has become my main deer hunting spot and we get our Christmas trees from there and it is just a fun piece of land to own. However, we always knew that the non-farmland parts of this land would most likely be sold when we needed to buy other land. And today is that day.

About 2 weeks ago, we listed the 22 acres of woods and meadow for $395,000. A couple of days ago, we got an offer for $330,000 and in the process of negotiation we added a couple of acres of wetland and made the sale price $337,500. Note this is only about $30,000 less than we paid for the whole parcel and we still own 90 acres of farmland with strong long-term development potential.

We decided to take the offer this quickly as we are currently working on a land purchase with a total price of about 1.3 million dollars. This is land that we hae farmed for almost 30 years and it is located within extremely close proximity to the core of our farming operation. Li'l Spock is working on part of this to be his first land purchase and his part is about $424,000 and my part is almost $900,000.

We always had this piece in mind as the land that we would have to sell the afore-mentioned woods/meadow to help with the purchase of.

Obviously, I was not expecting a reasonable offer this quick for the woods/meadow and I am somewhat still gasping at the speed and of course I have to wonder forever if I should have held out for more-but with the 1.3 million dollar deal in the works it takes a lot of pressure off, not only our family-but also our banker who has gone to bat time and time again for us.

Now, we just have to figure out if we are going to use the 1031 exchange for real estate. This happened so fast I haven't had a chance to really look into that yet. And yes, on the purchase agreement we signed today-we identified it as being part of a 1031.

So, really bittersweet-but it would have been worse not being able to swing a deal on the land we are purchasing as that is very important to the future of our farm.

One plus-is that the buyer supposedly wants it just for hunting-so if that is really the case-it won't be developed for awhile and it will stay just as pretty as it is now.

Plus the 90 acres that we still have with long-term development potential are a pretty nice retirement nest egg.

One funny story is that every few months (or maybe more often) I get random calls from people who want to buy the wooded area. One day last fall, Mrs Spock was riding with me in the combine and I got such a call. She started laughing and asked if I get calls on that all the time.

[tlynn78]

That's a gorgeous piece of land. Bittersweet, indeed. Great price, though. Should have asked to retain some hunting rights...

[Spock]

That's a gorgeous piece of land. Bittersweet, indeed. Great price, though. Should have asked to retain some hunting rights...

Thanks. The piece we are buying is from the estate of an old neighbor lady who left 9 heirs (children). Fortunately, they all agreed to give us first chance at at and at a pretty decent price.

They like to hunt and portions of that land are in a long-term conservation program. In the interests of making it work for them, they are reserving the hunting rights on most of it (not L'il Spock's part) for 15 years.

As all of the heirs (bar 2) are older than me (age 58) that generation will mostly be done hunting by then anyway, and I said that the hunting rights needed to sunset rather than start bringing in 3rd generations on each side.

[Spock]

With all the moving parts on the 3 land deals in progress and starting to approach the end I was reminded of how much I love to write-when there was a reason to do so.

I got a couple of the appraisals back and they are grating to look at.

In case you don't remember-for a number of years I worked part-time for a real estate appraiser working on (mostly) conservation land appraisals. I always joked that I had a Master's Thesis due every month. Our appraisals were very generally very complicated in and were presented in a very attractive package.

The appraisals I just got back-not so much. However, these cost about $1,000 and ours were $4,000 to $6,000. I wish I could show you guys an example of ours VS this one-not that there is anything wrong with it. It just fills a different need.

I could never write fiction, but I really enjoyed writing up the analysis on the property description and Highest and Best Use and comparable sales and so forth. My boss loved the way I wrote. I think my use of the word "Copse" to describe a small patch of trees on the subject property sent her over the moon. She really liked that and had never seen it in an appraisal before.

In addition to performing appraisals, she also reviewed them from other appraisers so she saw a lot of appraisers and how they wrote so I am flattered that she liked the way that I wrote.

Land is my true love and I was very fortunate to be able to write about very attractive conservation lands for a period in my life.

Writing has been missing for awhile now and I would like to find something else to write about again. The "Africa" thing scratched the bug for awhile then there was the "Sioux" which has been idle for awhile-and it is hard to get back to it.

The answer is-I just need to find a way to write about land again. That would fill the void.

[Im_Ace]

Why would you not 1031 it???? It's a perfect opportunity.

As long as you identify the replacement property within 45 days and close within 6 months, you're good. Seems to me that you plan on holding the new property for a while, then you can 1031 it for another parcel(s).

Why pay taxes on the gain if you don't have to?

It's what I do all the time.

[Spock]

Why would you not 1031 it???? It's a perfect opportunity.

As long as you identify the replacement property within 45 days and close within 6 months, you're good. Seems to me that you plan on holding the new property for a while, then you can 1031 it for another parcel(s).

Why pay taxes on the gain if you don't have to?

It's what I do all the time.

Good question and I figured you were in that world. If you don't mind I would be interested to hear what part of the real estate world you are in-ie apartments etc-the old appraiser in me loves hearing about the business

Yeah, we plan on holding it for awhile-hopefully my lifetime and the lifetime of L'l Spock.

We also plan on holding the remainder of the property that we sold the parcel off for a long time. However, given the amount of development there-that might be sold at any point if a nice offer comes along. Then we would probably 1031 that.

1) We did id the sale as being part of a 1031 to preserve that option. However, we did not know which would close first-the purchase or the sale. Everybody got a little nervous at the prospect of a retroactive 1031 if the purchase closed first. The main attorney that I talked to did not want to handle a retroactive 1031 and she would have sent me to a more specialized (expensive) attorney.

Note-because of the closing times-it did not turn out to be retroactive.

2) Therefore, we decided to go for keeping it simple.

However, remember we bought the property less than 5 years ago for 365,000 and sold this piece of it for $317,500(net). We are going to allocate $240,000 of the purchase price to portion sold-leaving us to pay taxes on $77,500 of gain. Thus the basis on the remaining land will be about $125,000. We will deal with that when the time comes.

After talking to the accountant-we just figured by the time I pay legal fees and such-I wouldn't gain that much on a 1031.

Oh, and another complicating factor that I just thought of was that L'l Spock was a third owner of the sold property but will not be a owner of my portion of the new proioperty-he is working on his own portion. This complicated things in ways that I did not predict until closing-when we each got a 1/3 check for the property-I did not expect that-I expected one check with 3 names.

A 1031 probably would have got messy fast-ie more legal fees under that unexpected scenario.

Selling is pretty new to me.I have very little experience on the sell side of real estate. I have mostly been on the buy side. This was only the second piece I have sold and that one was easy split as it was a pretty basic project to choose the amount of basis to apply to it so no 1031 (or tax)was necessary.

[Bob Juch]

Have you set up a family trust?

[Spock]

Have you set up a family trust?

Nope, no trust. We probably should do something along those lines-especially with the large amount of land my parents (in their early 80's) still own.

I thought of something else that complicated the 1031. Both parcels have (or will have) mortgages and things don't work so well with mortgages is what I was told.

[mellytu74]

Have you set up a family trust?

Nope, no trust. We probably should do something along those lines-especially with the large amount of land my parents (in their early 80's) still own.

I thought of something else that complicated the 1031. Both parcels have (or will have) mortgages and things don't work so well with mortgages is what I was told.

Definitely set up the trust.