Best Way To Handle a Bad Situation

8 Replies

I would greatly appreciate some advice. I own a property in Arkansas (1300 miles from me) free and clear that was bought for $215,000 as a primary residence in 2008. It is a large SFR on almost 50 acres in a rural town with a poor economy. Because of this, I haven't been able to sell the house due to the lack of qualified buyers in that market. I have rented it for a few years in hopes that the market would come back but the return is poor. I have it listed with a local real estate agent now at $199,000 because I can put the money to better use elsewhere. I am wondering about other options.

I am considering selling the house and 3 acres and owner financing that.   I was thinking that I could sell that for $150,000 with 10% down and 8% interest and no origination with a payment of $991 before taxes and insurance.  I could amortize it over 30 years with a fixed rate for 5 and a balloon due then at which time I can either keep the note or let them go elsewhere.  At that point I will have made $52,000 in interest, $15,000 in down payment money, and the payoff at that point should be $128,000 for a total of $195,000.  

I would still own the land, which I have considered either selling as a whole or subdividing it into 5 tracts of 5 to 10 acres each (part of it is on a substantial hill).  There is no highway frontage for any of the property, and no improvements to the land but there is rural water and electric 1/4 of a mile away.  I should be able to get $12,000 to $24,000/parcel for the land as a cash sale or I could owner finance that too.  

Would it be worth it to do this at such a distance or should I cash out at a loss and recoup the difference in my local market?  Please feel free to throw other ideas at me that maybe I haven't thought of yet.

If you can sell the house for 150K, I would do that.

Does the land have use for agriculture or timber?  Or could it be rented out for hunting or other recreational use?  If those are options I would be inclined to do those and keep it as one parcel.

Given your description of the local economy and the distance from utilities it doesn't seem like it would be worth much for development potential.

@Jesse T.  

Hi Jesse.  If I sold the house off separately then that would leave 42 acres of which 30 is pasture.  The remainder of the land is on a bluff with beautiful views and would make a great home site.  The reason I have contemplated subdividing the land is because it all has a great vantage point and the cost of the utilities wouldn't be that bad if someone wanted to build.  The electric poles and water lines are already close.   Also, the land would be easier to manage from a distance.  Also, if I were to owner finance the land, any improvements they made would stay if they were to default.  

@Teresa Ludlow  

Do you have any timeframe your working with? Are you under any financial stress that you need the sale money? If not, then I would say you have some time to really examine your options. For instance, have you tried looking for builders in that area and see if they would be willing to buy and develop the land? Have you looked at selling the pasture land to local ranchers or farmers? Have you had a natural resources / mineral survey done to see what mineral rights you could possibly sell? What if you have a "black gold" (oil) on that property? Just some thoughts....

@Alexander Merritt  Luckily I am not under any pressure and can look at all options.  I don't have the mineral rights unfortunately so that isn't an option.  There is natural gas all over that area so it's a shame.  You have definitely brought up some good scenarios.  Thanks for offering up some really good ideas.

@Teresa Ludlow You said

There is no highway frontage for any of the property,

You may need to check out the ability to sub-divide the property.  In my part of the world if there is no road frontage the property cannot be subdivided or has severe restrictions (family only, etc.).   Is the property currently accessible by road frontage or just by a Right of Way over some other property or some other means?    You may want to leave the minimum road frontage / road right of way to the remaining acres (if you have any); that is if you sell of the house and small acreage.  Alternately, I have traded acreage with nearby land owners before to gain road right of way from them (without having to come up with more cash) .... say 2 acres of non-right of way land for each acre leading to right of way.  Think creatively if you are willing to sell the land.  You may be able to sell some of the land to nearby land owners who may value it; or lease the hunting rights to the land for some cash, etc.

Good Luck!

@Jack B.  Thanks for the tips.  That is a great idea swapping acreage.  There is an easement to the property but at one corner it does join the road enough that I could put in a lane.  I will check on the easement though and see if it will work for several dwellings.  

What would the parcels be worth if you bought some used mobil homes and put them on the land?  Then sell the package with seller financing, or find a local developer that does this kind of thing.  It might change the equation quite a bit.  If there is a local developer you could partner with them, maybe try it with one lot and if it works out then do the next and so forth.

Have you thought about refinancing your money out and continuing to rent it ? I know your not making a great return but if it is paying the asset off, does that make sense? We own houses that we self manage from afar. The margins are small but have done well. If you can get your money out that might be better than taking a loss. Plus you still have the tax deductions. 

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