What do you think? Is this possible?

Discussion in 'Homesteading Questions' started by Cheryl in SD, May 9, 2005.

  1. Cheryl in SD

    Cheryl in SD Living in the Hills Supporter

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    We have an idea. Our place is not really big enough to homestead and dh would like to come off the road and stay home more. But the payments here won't let us.

    BUT we have equity in our home and we live in an area that people like to retire too. Usually it would cost them close to $200,000 to do that, we built ours for much less. Here is an ad we are considering putting in the paper. Would you tell me what you think?


    "Willing to trade equity in home in the Black Hills for 40 acres and old farmplace on prairie in Western SD, anywhere east of Phillip. Our home is close to being finished remodeling. It is located on 1.67 acres backed up to Forest Service. The house is an old 2 story farm house that we stripped to the studs and remodeled in 1997. Floors, some kitchen cabinets, deck and basement still to go. New electric, water system, insulation, open design with wooden beams and catherdal ceiling in kitchen, lots of windows and new full basement with double car garage. Good well and great tasting water. 3 bdrooms, 1 bath not including basement, which has bathroom and bedroom about 50% done. Willing to exchange for a 40-80 acre piece of land with buildings in exchange for equity. House in need of repair ok, as long as it is liveable. If interested give us a call at"

    Well?????

    Cheryl in SD
     
  2. Terri

    Terri Singletree & Weight Loss & Permaculture Moderator Staff Member Supporter

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    Would you rather stay?

    I could homestead well on 1.67 acres if my zoning would allow, which it doesn't.

    We bought 5 acres zoned agricultural for that reason. I hope to be able to move there in 5 years or so. *IF* I were allowed critters here on our one acre, I would get one of those mini-cows for milk, and consider a chicken traqctor, and things would get more productive. As it is, I mostly just have a garden and trees.

    Are the local laws stopping you?
     

  3. Cyngbaeld

    Cyngbaeld In Remembrance Supporter

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    I would expect you to have more luck selling what you have and buying your new place with cash. You could spend years waiting for someone to trade with you. Good luck, whatever you decide to do.
     
  4. Bruce in NE

    Bruce in NE Well-Known Member

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    Possible? I guess anything's possible. But you'll probably grow old trying to find your perfect homestead with a deal like that.

    You'd be better off just trying to sell your place while the RE bubble is still in place, tho getting somewhat wobbly. There are indications that the RE market is flattening out in some sections of the country, so you may have to act soon to ride the wave.
     
  5. rambler

    rambler Well-Known Member Supporter

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    You generally have more luck selling & buying with cash on a big purchase such as this. You narrow your market down _so_ much - you need to find someone with the property you want, who happens to want the proerty you have - that will be what, 5 people in the whole state???? Good luck finding each other....

    There likely are 50-100 properties for sale that you will want, & likely 50-100 people looking for the property you have. Selling yours outright & buying a bigger place outright opens up all 200 options, instead of just 5......

    As well, if people are retiring to your property, they likely will want a 'finished' place, not one that needs a lot of work. Reading your ad, I wonder if you ran out of cash & want to dump a place you got tired of without finishing it; as in, what's wrong with the place that you want to bail out of it now???? You would at least have a chance of finding intrest if your house had floors & bedrooms & such, finished out.

    Also, you are saying you want to trade your _equity_ for a much larger property that is free & clear???? So someone retiring would still be assuming your mortgage????? I would be getting real squeamish getting into this deal if I were the retiring person..... Sounds like you have cash flow issues, & I really don't want to upset my retirement fund with 'unusual' arrangements here..... I think I might get hurt on this.......

    I'm not sure you have enough to offer to make anyone look.....

    You understand my point here??? :) You have a rather unusual offer, & that makes a person sit back and wonder _why_ the unusual terms. Is this something I want to get mixed up in, or can I just spend a few thousand more & get a good property free & clear with no hassles.....

    Not to throw cold water on the plan, it _can_ work out for you & you don't know unless you try. But you are _really_ making a narrow pool of people to swap with, and I think it will be much, much harder than just selling your property outright & buying the 40 acres you want outright.

    Seems unrealistic that less than 2 acres with payments left on the mortgage and unfinished house would appeal to a retirement couple in exchange for 40 acres, a house & building all free & clear.... But I don't know your land markets.

    --->Paul
     
  6. hisenthlay

    hisenthlay a.k.a. hyzenthlay

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    What you're proposing is called a "like-kind exchange" in tax law, and it is actually fairly common, especially among real estate investors. The reason people like to exchange property rather than sell is that if you sell your house for much more than you paid for it and put into it in major improvements, you will have to pay a lot of taxes on that gain (up to 15%, I think). But if you exchange your property for another of equal or greater value, you are NOT TAXED on the exchange at all.

    So, it's true that it will be harder to find someone who wants your place and also has a place that you want, but it could save you a TON of money, so it's sure worth a try.

    People also sometimes do 3-way exchanges. Say there are 3 people, A, B, and C. You are A, and C has the farm you want, but C wants B's vacation house, not your house. B is looking for a house like yours. There's a way to set it up with attorneys, escrow, etc. so that you can all do that switch and have no risk of anyone backing out of the deal.

    I would suggest talking to a real estate and/or tax lawyer. There are even networks that they may know of that are set up to connect people who want to do these kind of exchanges. You don't have to do all the hard work of finding an exchange partner yourself.

    It's more complicated, but you could get a great deal. Good luck!
     
  7. Lt. Wombat

    Lt. Wombat Well-Known Member

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    Hi Cheryl. I have to agree with the other opinions and go with selling outright then buying with cash. From what we have seen the last few years in our part of the Black Hills is the folks moving here have sold their places in Denver, California, insert big city name here, and have a huge wad of cash to blow and they feel the need to show off by building a showcase home on a huge acreage.

    Up on the Limestone the smallest house being built by an "out of stater", that I know of is 7000+sf. There is an L.A. producer building a mammoth 10,000sf home with a 300x1000 indoor riding arena just north of the Limestone and another 15,000sf place being built on Ghost Canyon. Most big city retirees I have met don’t seem to appreciate an old farm house that needs some TLC but opt for a big new log home.

    1.67 acres might be enough to homestead but there is no market for products here (at least not in our area). People would rather make the trip to Rapid City than buy anything locally. Even if it's home grown/raised stuff. And with the ongoing drought hay/feed prices are going to be killers this season, even with a micro cow, micro chickens and goats.

    Also consider that if/when the govt. starts the Black Hills Water Project there is a slim chance, but a chance none the less, that their tampering with nature will screw up the water tables and you might be left hi and dry. An entire string of wells in our area are dry for the first time that people can remember.
     
  8. rambler

    rambler Well-Known Member Supporter

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    This is good advise, and mostly true - can be a good reason to search out such a trade.

    I am _only_ familiar with such farmland swaps in Minnesota. These land swaps are _very_ tricky to do, and have _very very_ many hoops to jump through. As explained to me, you need to be extremely careful on who signs what when, or the 'swap' part will be null & you will get hit with the taxes. In fact, regular real estate folks very often goof these deals up. If you wish to persue something like this, contact a good legal firm that has done such transactions before. The paperwork is a nightmare, and the land should actually be traded 'blindly' without knowing each other - or other such silly rules. A very odd set of rules governing this, an ad in a paper would likely trip it up to begin with......

    Again, I don't know how this applies to swaping houses/ homesteads/ residential property, but the agricultural version of this land swap to avoid taxes is extremely complex and should not be attempted solo. One would never make it through....

    Capital gains tax, a very odd concept. Taxing inflation is what it amounts to.

    --->Paul

     
  9. Cheryl in SD

    Cheryl in SD Living in the Hills Supporter

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    Thanks everyone!

    We took your advice to heart and have a new plan! :D

    We will take the next two years to finish the house (yes we DID get tired of fixing it, but your kick in the pants has given us a second wind).

    During that two years, we will begin watching for a bit more land and the situation we want. Also, we will be working on a plan for income (off land) of our own after we move. In the meantime I will be learning all I can about gardening, animal husbandry and other things we will need to know.

    At the end of two years we will begin trying to sell this place, and we should have a fairly good idea of where we want to go. I don't MIND the Hills, but REALLY miss the prairie. I feel so much more peaceful there. Something about being able to see forever. This will also give time to see what this drought will do. It should improve our financial picture, and unless something drastic changes, the house should only increase in value. It will also give us time to LEARN some of the things that will make homesteading a little easier.

    It was an idea, and at least we feel that now we are getting headed in the direction we want to go.

    THANKS!
    Cheryl
     
  10. sisterpine

    sisterpine Goshen Farm Supporter

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    Way to go! Sounds like some good decision making going on at your place!
     
  11. Maura

    Maura Well-Known Member Supporter

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    Sounds like a plan. A view across a lake gives you the same kind of "goes on forever" feeling. Of course, we are near the Great Lakes and you can't see to the other side, but any decent sized lake may give you the feeling you desire, if you can't find a prairee home.