My neighbor asked again about buying some of my yard

[skimple]

Call your town inspector and ask him to come out. Walk the lot line with him and ask what impacts the sale would have on your property. What about your own set-backs? The ability to build or expand on that side of your property?

 

[NoTine42]

With a mortgage, the bank would have to approve it because they get 1st say as a lein holder. (Unless you are lucky enough to work with bank people with common sense if the mortgage is getting paid off)

 

[BurnItDwn]

If you sell it, he will build on it, if you are OK with buildings going up there, then take the money, invest it or spend it ...

 

[NetWareHead]

If you sell it, he will build on it, if you are OK with buildings going up there, then take the money, invest it or spend it ...

Pretty much this. Your neighbor has a project in mind that needs the land he is eyeing.

 

[CPA]

He will if he does? I don't get your point. Also, you're assuming that chopping that 10 feet off will reduce the value of his property by $15k. I'm not so sure that's the case. I'm not sure it would reduce it at all. Maybe in theory, but it sounds like a substantial plot, and I'm not sure taking 1250 sq. feet of it will really affect it.

I took it as you're making the assumption that he would invest the money AND he would get a better rate of return than the appreciation of his land. That's all. There's been no indication from the OP that he would invest it NOR secure an investment that would appreciate better than his land less the time value of money.

Any reduction of land theoretically decreases the overall value of the property otherwise 1 ft of property = 1 acre of property, or any other comparison.

One other thing I just though of in the shower is that he will have to pay capital gains on the sale of this land and he will not be able to use his home sale exclusion UNLESS he sells his home no more than two years after he sells the piece of property. And this is even a little tricky because the IRS requires the property to be vacant - whatever that means in the eyes of the IRS. So, reasonably assuming that he must pay capital gains, he will have to calculate the basis of the land (purchase price plus improvements) and subtract from selling price, multiplied by capital gains rate. I would be surprised if the apportioned value of that land at purchase was greater than the sale price. So, he won't get $15K, he'll get something less.

 

[OutHouse]

I took it as you're making the assumption that he would invest the money AND he would get a better rate of return than the appreciation of his land. That's all. There's been no indication from the OP that he would invest it NOR secure an investment that would appreciate better than his land less the time value of money.

Any reduction of land theoretically decreases the overall value of the property otherwise 1 ft of property = 1 acre of property, or any other comparison.

One other thing I just though of in the shower is that he will have to pay capital gains on the sale of this land and he will not be able to use his home sale exclusion UNLESS he sells his home no more than two years after he sells the piece of property. And this is even a little tricky because the IRS requires the property to be vacant - whatever that means in the eyes of the IRS. So, reasonably assuming that he must pay capital gains, he will have to calculate the basis of the land (purchase price plus improvements) and subtract from selling price, multiplied by capital gains rate. I would be surprised if the apportioned value of that land at purchase was greater than the sale price. So, he won't get $15K, he'll get something less.

my head just exploded.

 

[CPA]

my head just exploded.

You can thank the IRS for that

 

[DrPizza]

That part of my yard is the smallest, this is how my yard is

he is an older retired guy so nothing crazy

If he's a nice older, retired guy, why not work out a lease with him; something that he can renew annually, but will expire when he expires. Say, maybe, $500/year, non-transferable. That might sound nicer to him - he gets the extra space to use, and it would take 30 years before it cost the same as outright buying it.

Your benefits:
less to mow
maintain ownership and thus if the value of the land appreciates, it gains value
A better friend as a neighbor
An extra $500 per year for allowing a neighbor to mow part of your lawn and walk/use that part of your lawn.

Plus, the two of you save on the costs of surveying, all the paperwork with your county - tax maps, reassessments, title searches, etc.



Of course, no one mentioned what I think is the most rational reason - he's retired and wants to move somewhere, maybe Florida. Having that extra 10 feet of property could possibly increase the desirability of his house significantly, and perhaps even raise the value of his house by the 15k that he's paying you. If that's the case, then the lease idea would be out; and you would know his purpose.

 

[Cheesemoo]

That's $12/sqft for 1250 ft^2 of your property.

Around here (south Louisiana) that is about right per SF. Not sure where you are loated.

Call your town inspector and ask him to come out. Walk the lot line with him and ask what impacts the sale would have on your property. What about your own set-backs? The ability to build or expand on that side of your property?

I took it as you're making the assumption that he would invest the money AND he would get a better rate of return than the appreciation of his land. That's all. There's been no indication from the OP that he would invest it NOR secure an investment that would appreciate better than his land less the time value of money.

Any reduction of land theoretically decreases the overall value of the property otherwise 1 ft of property = 1 acre of property, or any other comparison.

One other thing I just though of in the shower is that he will have to pay capital gains on the sale of this land and he will not be able to use his home sale exclusion UNLESS he sells his home no more than two years after he sells the piece of property. And this is even a little tricky because the IRS requires the property to be vacant - whatever that means in the eyes of the IRS. So, reasonably assuming that he must pay capital gains, he will have to calculate the basis of the land (purchase price plus improvements) and subtract from selling price, multiplied by capital gains rate. I would be surprised if the apportioned value of that land at purchase was greater than the sale price. So, he won't get $15K, he'll get something less.

These two are exactly it. Not just value of the land but how it will effect yours and capital gain taxes.

The lease option may not work depending on what teh old guy wants to do with it.

 

[SAWYER]

thanks for all the input

 

[BurnItDwn]

I took it as you're making the assumption that he would invest the money AND he would get a better rate of return than the appreciation of his land. That's all. There's been no indication from the OP that he would invest it NOR secure an investment that would appreciate better than his land less the time value of money.

Any reduction of land theoretically decreases the overall value of the property otherwise 1 ft of property = 1 acre of property, or any other comparison.

One other thing I just though of in the shower is that he will have to pay capital gains on the sale of this land and he will not be able to use his home sale exclusion UNLESS he sells his home no more than two years after he sells the piece of property. And this is even a little tricky because the IRS requires the property to be vacant - whatever that means in the eyes of the IRS. So, reasonably assuming that he must pay capital gains, he will have to calculate the basis of the land (purchase price plus improvements) and subtract from selling price, multiplied by capital gains rate. I would be surprised if the apportioned value of that land at purchase was greater than the sale price. So, he won't get $15K, he'll get something less.

Capital gains only if the home has increased in value. I agree he would need to pay for an assessment, and then extrapolate a cost basis..

One possible advantage, is that if his property value decreases, he might be able to get his property tax assessment reduced, thus, he may potentially slightly reduce his property tax liabillity...

Also, assuming OP is earning under 400Kish, capital gains will suck, but isnt it at most about 15%?

 

[Rage187]

I like the lease idea.

 

[CPA]

Capital gains only if the home has increased in value. I agree he would need to pay for an assessment, and then extrapolate a cost basis..

One possible advantage, is that if his property value decreases, he might be able to get his property tax assessment reduced, thus, he may potentially slightly reduce his property tax liabillity...

Also, assuming OP is earning under 400Kish, capital gains will suck, but isnt it at most about 15%?

I would be shocked, absolutely shocked if the land value has decreased. Since he's only selling the land, he would have to value the land at the purchase. You can do that by looking at your property assessment at time of purchase. Property assessments usually break out land versus home.

You're right about the property tax liability, but that may pennies on the dollar. Not sure what state he is in, but Texas which is notorious for property tax rates (since we don't have income tax) is still capped at a little over 3%.

 

[Elixer]

A year or two ago he causally asked about buying 10 feet of my yard on his side and said $1500, I never thought about about it because it seemed ridiculously cheap. It would have been 10 feet in and all the way from the front yard to the back which is maybe 125 feet or so on that side. He asked again but he clarified, $1500 for each foot. This offer really has my attention. I have a huge yard so I wouldnt miss it and am really considering it.

They want the extra 10 feet so they can make an escape/transit tunnel from the main drug house.
So now, they want to slide you some of those ill-gotten gains, so when the feds come busting down his door, you will be the accomplice he frames, since the tunnel is on your property line.

Or, he found gold/oil on those 10 feet, and will make millions, and he will be laughing all the way to the bank.

Or, he is going to move his mother-in-law's trailer to that area, and she needs room for her 'garden'.

Or, they just want more land, and next year they will ask for even more land.

One of those is bound to be true....

 

[Gunbuster]

Not worth it for $15k. My Neighbors tried to pull this stunt on me so their pool would not have to be on an angle due to the setback. They offered a piddly amount with the off hand remark that they paid cash to build their 2 million+ home... Boo-Hoo too bad so sad.

 

[cbrsurfr]

Property taxes rarely go down. If anything it would likely increase. If that little piece of land is worth 15K then the rest must be worth 100K!

I have a lot of farmer relatives and they would never be willing to sell off parts of their acreage. All or nothing, otherwise they were fearful that the tax on all the rest of their land would skyrocket.

 

[CPA]

BTW, this thread reminded me to look at this year's assessment of my property. My 1.3 acres just went up in value $40K! GAH!!!!! Luckily the dwelling went down about half that. My thinking is they made some assessment correction between land and dwelling which makes it much harder to contest the overall property value. Land value increases are easier to defend than dwelling values.

 

[thestrangebrew1]

You wouldn't be able to subdivide 10'. Most if not all zoning codes have a minimum lot size per zoning designation ie. Agriculturally zoned property would be a minimum of 20 acres vs a residentially zoned property of 6000 sq. ft. A 10' lot wouldn't conform to the minimum anywhere. What you could possibly do is a property line adjustment. Basically shave the 10' line in towards your property giving him the extra room he needs without creating a new parcel. Obviously this work would require a surveyor and reassessment of both properties.

One thing to consider when doing this though. Your local planning department might not support an oddly shaped parcel. If your neighbor was proposing a 10' srtip up the length of your property, that would make more sense than carving out a 100 sq. ft block. And both of you would still meet the minimum parcel size requirement presumably.

 

[edro]

My parents bought a 25' strip that equaled around .25 acres.
They built a detached garage on it. Their lot was in the middle of a giant farm field.
I think they paid around $5000 for it to the farmer. (who owns tens of thousands of acres)
They paid for the re-survey and all that.
I have no idea what tax implications the farmer had.

It's fairly common around here.

 

[rudeguy]

My parents bought a 25' strip that equaled around .25 acres.
They built a detached garage on it. Their lot was in the middle of a giant farm field.
I think they paid around $5000 for it to the farmer. (who owns tens of thousands of acres)
They paid for the re-survey and all that.
I have no idea what tax implications the farmer had.

It's fairly common around here.

Its like most things that get discussed here; its YMMV. Around here it wouldn't be a big deal at all. Out in the country where my sister lives, property lines might as well not exist. Her and her neighbors (they are the only 3 houses anywhere near close) treat their properties as one. If one neighbor wanted to borrow 10', who cares? Chances are something of theirs is on that neighbor's property anyway. Then once you get back into the woods, nobody has any clue whose is what.

But I couldn't imagine trying to do that in a place like California or New York.

 

[Blackjack200]

I took it as you're making the assumption that he would invest the money AND he would get a better rate of return than the appreciation of his land. That's all. There's been no indication from the OP that he would invest it NOR secure an investment that would appreciate better than his land less the time value of money.

Okay, but I think you have to make a ceteris paribus comparison here. You can't compare one scenario where he's thrifty and one where he's not when you're trying to decide which decision makes the most sense.

It might be good advice to say "If you don't think you can save/invest the money, in the long run you will likely come out ahead financially if you don't sell".

Any reduction of land theoretically decreases the overall value of the property otherwise 1 ft of property = 1 acre of property, or any other comparison.

He said in the OP that he wouldn't miss it, so I doubt a prospective buyer would either. As a general rule, improvements are worth much more than the land they sit on, unless you're in a city or something. I wouldn't be surprised if this had negligible effect on resale value.

One other thing I just though of in the shower is that he will have to pay capital gains on the sale of this land and he will not be able to use his home sale exclusion UNLESS he sells his home no more than two years after he sells the piece of property. And this is even a little tricky because the IRS requires the property to be vacant - whatever that means in the eyes of the IRS. So, reasonably assuming that he must pay capital gains, he will have to calculate the basis of the land (purchase price plus improvements) and subtract from selling price, multiplied by capital gains rate. I would be surprised if the apportioned value of that land at purchase was greater than the sale price. So, he won't get $15K, he'll get something less.

That's all true, but capital gains aren't a huge amount. I'd be surprised if they were enough of a consideration to become a deciding factor.

BTW, this thread reminded me to look at this year's assessment of my property. My 1.3 acres just went up in value $40K! GAH!!!!! Luckily the dwelling went down about half that. My thinking is they made some assessment correction between land and dwelling which makes it much harder to contest the overall property value. Land value increases are easier to defend than dwelling values.

Wow, you get assessed every year? I don't think my property has been assessed in over thirty years.

 

[Red Squirrel]

Hmmm tough call, 15k is a decent amount of money, but at the same time, in a year from now, that money will probably be gone depending what you use it for, and so will a chunk of your yard. I probably would not do it, but it would be a tough decision, since having 15k right here right now sounds pretty nice. That could do quite a few projects around the house.

Another issue is all the logistics involved in doing it. The city might end up charging both parties some ridiculous fee to redo the claims or whatever has to be done to make it official and legal.

 

[Blackjack200]

Hmmm tough call, 15k is a decent amount of money, but at the same time, in a year from now, that money will probably be gone depending what you use it for, and so will a chunk of your yard. I probably would not do it, but it would be a tough decision, since having 15k right here right now sounds pretty nice. That could do quite a few projects around the house.

Another issue is all the logistics involved in doing it. The city might end up charging both parties some ridiculous fee to redo the claims or whatever has to be done to make it official and legal.

I'd make the buyer pay all of that.

 

[Pulsar]

lol no I mean it would be $15000

On that side he has only enough room for his single car drive to go around the back of his house and has no yard.

That is $522,000 per acre. If you don't do it, you're insane.

 

[Slew Foot]

That is $522,000 per acre. If you don't do it, you're insane.

That's cheap as fuck around here ($4 million/acre, San Jose CA)