Pooling resources to buy land

[cbcansurvive]

My wife and I are committed to buying land in Maine within the next five years for the purpose of building a small primitive vacation/hunting camp and eventually moving to the property full time, living at the camp while we construct a permanent home, and then possibly renting the camp as an income generator. A while ago I remember reading an article on either Backwoods Home's website or Mother Earth News about families pooling resources to buy large tracts of land in order to bring the total cost for each family down. We are friends with another family (I've know the guy practically my whole life-since age 5) here in New Jersey that has a similar outlook to ours with regard to frugal living, self sufficiency, etc... Just this past weekend we were both invited to a family picnic by a mutual friend and we talked to them about our plans for Maine and they are very interested for the same reasons. We would be interested in going in with them on 80-100 acres and then subdividing it so that each family ends up with their own piece of land. My friend Tom also thinks his brother would be very interested as well, so if we could find a piece on the larger side we could even split it three ways.

Has anyone here purchased land in this way? If so, how did you do it? How do banks view this sort of thing? Did you involve a lawyer? It probably sounds cynical, but I would insist on it, just because whether you're talking about family or friends, informal agreements about money and property can always turn ugly. I would just want to have it spelled out in legal terms how much everyone is expected to contribute and what they will get for that contribution, ie:

Tom and Adrian Smith will put 1/3 of the total down payment down and in turn have that piece of land which (insert description with boundary lines, etc...) totaling X acres.

Are there any other considerations we might be missing?

[Rick]

One possible issue would be what to do if one party stops paying the note and /or wants out. It happened to me in 1982. The other two parties got married and wanted out and we ould not affod it alone.

Another is how to make decisions without unanimous agreement.

[Michael W. Smith]

Another consideration is how it will be split. Here in PA, 100 and some acres could you some flat land, some uneven land, and some hilly land. Who determines who gets what part?

What if part of it is wooded and the other isn't, who gets the woods? Who gets beside the creek? Who gets . . . . . .?

Also, will there be seperate driveways for each place or will be one main driveway where somebody lives further back from the road and somebody past them?

Until you actually find the land, and see what is on it, what shape it is, etc, it's kind of hard to determine what all you might get into.

Just some thoughts. Also, what if there was a house on this property? Who gets the land with the well and septic tank already installed, and who ends up having to drill their own well and have their own septic tank put in?

[Hoop]

Sometimes it works, sometimes not.

My mechanic purchased a 40 acre parcel with a friend. They split it in half immediately upon purchase. Now, they don't even speak to each other.
They did however get a terrific deal on the land, paying $20,000 for the land back in 1988. Today, the same land would be worth upwards of $150,000.

Here is what I would do to make things work. First, decide on how much land it is you wish to purchase, and of course the price range. Then decide EXACTLY how it is to be divided up. THEN, decide on if you'll be drawing lots for the parcels or if there will be another way of determining who gets what. Remember, every parcel of land is different. Land has varying amounts of trees, clearings, swampland, soil types, etc. Know that for a fact if you purchase 120 acres between 3 families, each 40 acre parcel will have a different value. Yes, you can get an appraisal for each parcel from an outside source.

If you have readily available funds, go for it. If not, talk to your bank loan officer and see what they think about things. If they are lending the funds, you'll have to go by their rules. quite often, that means the land needs to be surveyed & appraised.

Also discuss easements. Spell out in FULL detail exactly how this will be addressed. Know for a fact that shared roads are a nightmare waiting to happen....and avoid putting yourself in a situation of having a shared road....if possible.
If a shared road is a necessity, spell out completely the terms of road maintence, who pays for costs, snow plowing costs, gravel costs, etc. Think 20 years into the future. Put all terms about the easement & maintenance costs on the deed. Leave nothing to chance.

Also discuss utility easements and put this in writing.

You may or may not need a survey. Discuss the costs and payment if this is to be done.

And just so one is on the same page, ask what the long term uses of the land will be. If the land is un zoned and your neighbor wants to open a dog kennel with 56 nonstop yapping dogs, will you be OK with this? IF one person wants a rifle shooting range, will you be OK with this? A trailer park? A junkyard? A field for spreading septage? Assume nothing. Its possible your co-purchasers have white trash tendencies. They may have kids that are meth addicts looking for a place to manufacture meth.

I look at things in this manner. If you want to move a worn out grubby old trailer on your property, thats fine. But please put it out of sight where it won't be an eyesore and devalue the adjoining property. Out of sight is out of mind. Seems like in most rural area's, blighted properties along highways are magnets for people dumping junk.

Cover everything. Leave nothing to chance. Everyone will know where they stand.

[Witterbound]

It muchly complicates things. If you all go together and buy one piece, the Bank would probably make each of you be liable for the mortgage on the whole thing, so if one bailed, the others would be holding the mortgage. So, I think you'd actually need to identify the parcel, decide how you want to split it up, have it surveyed, and each of you buy your piece. Joint ownership just complicates things greatly, and I think is fraught with problems. If you don't get lawyers involved now to get it done right, someone will end up getting lawyers involved later, and it will cost you more and cause more pain.

[KeithBC]

It definitely complicates things. Good plan to get a lawyer involved. To preserve friendships, it's the only way - things can get ugly otherwise.

Banks don't like mortgaging shared properties. They will likely make everyone co-sign. If one co-owner wants a loan to build his own house on the property, chances are they will make everyone co-sign the loan.

Determining the value of the property once buildings are built is problematic. If one co-owner decides to sell his share (house and share of the land), its value is lower than an equivalent wholly-owned property, because few people will want to buy into a co-ownership arrangement. But how much lower is something realtors have difficulty with.

You need to start out with a contract that anticipates all these things and spells out how they will be handled. I know people who have gotten into serious legal and financial hassles from not having a detailed co-ownership contract.

[Joshie]

If you're going to divide it anyway, why don't you each purchase your own land? You can live close to each other. Seems to me that making such a purchase would have to be a cash purchase. I doubt that a bank is going to want to finance such a transaction. Heck, around here it's difficult to get a long term loan on less than 30 acres. It's easy if you're talking about five to maybe 10 acres but not so easy if you're talking about much more than that.

[jlrbhjmnc]

If you're going to do this, you'll need a contract that deals with all the possibilities - death, divorce, drug abuse, criminal acts, bankruptcy, paying taxes, standards for buildings, wells - anything that could imperil any member of the partnership or make someone want to get out. The contract has to be in place for the whole deal, because you never know what might happen. Decide what will happen - how the partnership will deal with each possibility - in all the circumstances you can dream up BEFORE they happen. Once you're financially tied, it's too late and getting untangled can be a huge mess that leaves one or more of you broke or worse. Ask around for a really experienced real estate/business attorney - you might need one of each. They deal with the messes people make with partnerships and can assist you in setting things up just like you'd need if you went into business together, which is sort of what you're doing.

[Navotifarm]

There are several possibilities here. The more people involved the more complicated the situation gets. Too many cooks spoil the broth. Since this is YOUR idea, pin down as best you can what is most important to you.

My favorite article ever in TMEN was where a divorcee bought a parcel of land in New Mexico, subdivided and sold shares to friends and turned enough profit to pay for constructing her house. She and her ex-father-in-law did the actual building, though so maybe she didn't have a big profit margin.

I got my land, originally 23.88 acres with the intention of subdividing and selling off parts of it so I would be able to afford to build my home plus choose my neighbors (all homesteaders) plus have retirement income for my old age. The first sand in my gears was that each parcel to be subdivided had to have a health department approved permit for well and septic plus a survey plat showing the boundaries and a 50 foot access plus road maintenance agreements. To get a septic field permit you had to hire a backhoe @$500 a day to dig two test pits (one original septic field and a second back up field). There's more but that was starters.

I got permits for one parcel for the well and septic but they lapsed while I was looking for the perfect neighbor with money and shared interests. Then the health department changed requirements so the old approved septic areas didn't meet the new requirements which were for more depth before you hit rock.

When I got my land you could subdivide "four and four," four parcels every four years. So I would do three lots with a 16-acre residue to be subdivided after four years. Then THAT zoning rule was changed so the main parcel has to be a minimum of 20 acres.

In other words, before you buy any land, find out the local laws affecting your subdivision. That means zoning (how small lots can be, density of population, health department affecting water and sewage, are they planning on running a superhighway or building a walmart in the middle of your tract, electrical easements, costs of bringing electricity. For example, when I had land in west virginia it would have cost me $23,000 to bring power to my land. Here in Virginia my land is in co-op area and they brought me power underground FREE but took calipers to measure how far they would go, so I located my home based on where power could be brought free from the nearest pole on the adjoining land.

You might think about a trust owning your land. There are some places in Virginia and Maryland put together in the hippy era but kept secret now where a kind of club owns the land and the members have individual houses. They can't sell to outsidere. When a family wants to move out, their house must go to another owner acceptable to all. One of these places is in Greene County. It features separate homes with the bulk of the land in a farm run by a hired farm manager. The farm produces some of the residents' food.

I've wondered about "condominiumizing" my land - selling shares in it so people can come and go and enjoy it and my taxes get paid. Kind of like selling shares in a cow or goat.

This is a WONDERFUL thread! Can't wait to read more!