Turning to the Texags brain trust on this one.

My mother recently passed away and our family farm is available. It is 90 acres near San Antonio.
I have first right of refusal to buy it, and as one of four children, the will stipulates that I will only have to pay 75 percent of the value, which is about $975,000 (ergo my portion that I would need to buy is $730,000).

The good news is that my current house is near Austin (actually Taylor, a mile from the soon-to-be-built gigafactory for Samsung is going to be). My home value has been increasing rapidly and while it's not enough now, it's approaching enough, or at least enough that I can cover the difference between the two with a loan. Worst case scenario, it's $550K, but best case scenario is it's in the $650-700 range, which means I can close the gap enough to buy the farm if I sell.

The trick is chickens and eggs. I can't sell my current house until I move out of it and do some upgrades/repairs, and I can't move out of it until I have a place to move to. Ideally, this would be the family farm, but I can't move there until I've bought it.

Add to this that there is a deadline to buy the farm of 6 months and the upshot is I need to find a way to get a loan for the $730,000 now at a decent, not exhorbitant rate (ideally with some kind of grace period on payments if that's even possible) and essentially pay off most if not all of it in a few month's time.

Keeping the farm is my top priority. Now, if I have to break off some and sell it to pay off debt, I can do that, but of course, even that part is not possible until I own it.

Thoughts?

Are you buying out your brothers/sisters?

Yes. This is why I only need to come up with 75 percent, not 100 percent. The will actually lays it out that way and no one is contesting it if I come up with the money.

There are loans for this type of thing - look up a bridge loan.

Might want to also post this (or a reference) on the Real Estate board. Quite a few lenders frequent that board and may offer some guidance.

Edit: My condolences to you and your family. Thankfully, your mom (parents?) had their affairs in order.

Aalan,


Shoot me a DM or email (email is my screen name here) as we do bridge loans. They depend on the details but maybe something we can help with.

one thing you should do how is figure out what your home is actually worth.

You might not get an exact figure, but you should be able to get closer than that $150K band,

I can help you with values and game planning. My contact info is in my profile. I cover farm and ranch and Felipe can help you with the single family side in the Austin area.

Are your siblings willing to help with the financing at least for a small window of time?

I will vouch for Jay a few posts up. He handled my loan a couple years ago and looked at bridge loans as an option. He knows his stuff and can lay out what might work best.

Sell your house asap, move into a rental for couple years, then buy the farm in 24-25, when its 60% of the market value it is now.
#yolo

aalan94 said:

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Yes. This is why I only need to come up with 75 percent, not 100 percent. The will actually lays it out that way and no one is contesting it if I come up with the money.

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To clarify, is this the only asset in play from an inheritance standpoint? In other words, if there is other cash / assets /accounts can you subtract the value of the farm from the top line total and then your siblings get the equivalent in cash while you walk with the house?

If not other assets, then this is moot.

Make it happen if you want it. In a similar position, we got a loan from Capital Farm Credit. 20 percent down and I received my portion from the sale. The appraisal came in at the purchase price. Almost 10 years later, the land is almost paid off and is now worth significantly more than I paid for it. Curious how many feet of road frontage on a public road the 90 acres has. To make a previous land deal work, I sold off some of the frontage in smaller tracts. That was 20 years ago and the remainder that I still own is my best investment ever. Good Luck!

I don't know if you get along with your family, but it seems like it would not be unreasonable to ask to buy the farm contingent on selling your house in the coming months. At the end of the day I am assuming they have no interest in it, just want the cash and you are probably more reliable to get a deal done versus trying to market it in this environment (this does not sound like hill country land based on the $$ you are quoting).

Pretty complicated transaction for sure.

First realize unless you reconfigure the farm you need farm/ranch loan which is much different then my residential loans. You can carve out the house on day 5 acres and get a residential loan which will have better terms but still need to address the rest of the land.

Farm/ranch loans typically require 20% equity but you have the 25% vested interest. But you need a lender to credit you with that in a transaction. I'd have to run hard numbers to see if separating the home from the land.

As for the Bridge loan it's simple. Take the value of your current home and times by 80%. Subtract the money owed on the home and your net is that amount. So

500k value
400k is 80%
Owe 200k

400-200= 200k loan.

You also need to see if you qualify for the new loan while carrying the old loan. Or do you need to sell? No need for a bridge I'd you can't qualify for both.

Also check with interested parties to see if they will owner finance. My guess is no but won't hurt to ask.

I don't see any reason you shouldn't allow 350 TexAgs posters each to buy-in for $1000 (48%), you own 52 percent controlling share and you allow 350 of us Aggies to finally feel like true Aggies and say we own a farm.

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There are loans for this type of thing - look up a bridge loan.

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I have. My concern is we're talking about really high interest rates, and unfortunately, I might need to carry this for a while. See below.

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one thing you should do how is figure out what your home is actually worth.

You might not get an exact figure, but you should be able to get closer than that $150K band,

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Yes, I'm doing that as part of this process. But here's the rub.Apart from the time it would take to move out of my house and then do some rennovations to get it into a sellable position, there are market reasons at play too.

My house is in a very rapidly expanding area near Austin. I live in Taylor, about a mile from the site of the new $17 billion Samsung chip factory. The price this month will be very, very different from the price in 6 months, much less a year. This is one reason why I'd like to float or bridge a little longer. It could be a very large difference in sales price.

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Are your siblings willing to help with the financing at least for a small window of time?

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Not really. Not going into details, but no.It's more about lawyers than family members.

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To clarify, is this the only asset in play from an inheritance standpoint? In other words, if there is other cash / assets /accounts can you subtract the value of the farm from the top line total and then your siblings get the equivalent in cash while you walk with the house?

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There is cash, but the will is structured in a way that I can't do that. I can take the cash and use it as a downpayment, that's all.

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I don't know if you get along with your family, but it seems like it would not be unreasonable to ask to buy the farm contingent on selling your house in the coming months.

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I agree, that would be reasonable, and again, not going into family details, but that's not really an option.

Sounds like you really want the farm. If so, exercise the option assuming not any big outlay of funds. If you have a good relationship with the other heirs, you could tell them you're going to do everything you can to close the transaction before 6 months. Can then ask them if they would be open to financing the purchase for additional months/year or so if you couldn't get it all completed in 6 months. Worst case then would be obtaining financing the other posters are talking about. Also, property value might very well increase in next 1 to 2 years. Let me know if you need to discuss further.

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I don't see any reason you shouldn't allow 350 TexAgs posters each to buy-in for $1000 (48%), you own 52 percent controlling share and you allow 350 of us Aggies to finally feel like true Aggies and say we own a farm.

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How about I move bonfire there, we build it as tall as we damn well want, and I charge 10,000 people $50 each to attend? I mean, if we're going crazy, might as well go all out.

Honestly, prices could just as easily drop in your market the way things are going.

The Samsung project is great for the area but it's not exactly a secret and the macro forces aren't great right now.

Yea the Samsung play is more like 5-10 years. I'd discount that opportunity cost somewhat

Proposition Joe said:

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I don't see any reason you shouldn't allow 350 TexAgs posters each to buy-in for $1000 (48%), you own 52 percent controlling share and you allow 350 of us Aggies to finally feel like true Aggies and say we own a farm.

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Username checks out.

aalan94 said:

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I don't see any reason you shouldn't allow 350 TexAgs posters each to buy-in for $1000 (48%), you own 52 percent controlling share and you allow 350 of us Aggies to finally feel like true Aggies and say we own a farm.

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How about I move bonfire there, we build it as tall as we damn well want, and I charge 10,000 people $50 each to attend? I mean, if we're going crazy, might as well go all out.

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10 years from now instead of playing Arkansas at Jerry World, we could be playing them on your farm land with thousands of Aggies packing the make-shift bleachers.

If you build it, they will come.

A couple of thoughts come to mind.....you could sale your current home to cash out the equity in it to buy the farm, and rent locally until you are ready to make the move.

Another option would be to refinance and cash-out the equity in your current home in order to buy the farm. Interest rates, continue to increase rapidly, so while it sounds like a bad idea, if you are 6-months to a year a way from selling it and paying off the mortgage anyway, the financial consequences of a year's interest are minimal, and gives you the liquidity you need to save the farm.

Aalan,

Best of luck for you as you try to navigate this. Seems your options are the following:

-Some form of debt against your current assets like a 401k or even selling assets.
-Some form of debt against the land (seems this is untenable)
-Adding a business partner with capital

Maybe I'm missing something. Do you need to come up with 730k to buy the whole farm outright or is the 730 only going to cover the down payment on a way bigger loan?

Because if you only need 730k for the whole farm, and the lenders here are saying you need 25%. Just sell your house (assuming you own it outright) and your home proceeds should be more than enough to cover 183k you'll need to bring to the table for a farm loan.

Why not just get a 75% LTV loan from someone like Capital Farm Credit and pay off siblings with that 75%? Then sell your house when you are ready to move?

The 730 is for the whole farm. The problem is the will is structured with a very narrow 6 month window to buy, otherwise it gets sold to the general public. It's nearly impossible for me to get out of my house and sell it in time. I'm looking at putting a deal together that hopefully the other heirs will agree that maybe lets me make a rent-to-own or something. Or installments. Really looking at all options.

Your ability to get a loan probably depends mostly on your current income. If you can qualify for a loan you'll get one, if your plan is to sell something later and use that to pay off the loan and you can't qualify by yourself you're going to have trouble, hence the high interest rates you're seeing. Banks don't care about good intentions.

Aren't you a beneficiary of the estate? How many brothers and sisters are there? If you are one of 4, isn't the 25% discount just waiving your proceeds? Or do you get cash out of the sale after the 75% discount? That may help with the math because you could work it lower by waiving your right to your proceeds.

OP, have you walked into a bank and asked a loan officer?

Watch the last few episodes of the Office, it's a how to guide

If this is truly buy an asset for 75 cents on the dollar, and you can't easily find a bank or other investor to make that work, then you have a problem. Now, if your problem is you "want" to own a $1,000,000 farm and can't afford it, that's another issue. At the very least, you should walk away with a hefty profit. Hell, I'll give you $100,000 cash for your rights today!

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If this is truly buy an asset for 75 cents on the dollar, and you can't easily find a bank or other investor to make that work, then you have a problem. Now, if your problem is you "want" to own a $1,000,000 farm and can't afford it, that's another issue. At the very least, you should walk away with a hefty profit. Hell, I'll give you $100,000 cash for your rights today!

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I wouldn't take 2 million for it. I think you misunderstand the term "family" in family farm.


The bottom line is it will work, it's just a matter of making it happen. I do have an option that could involve bringing in an investor, and once I actually own the land, I can sell off a section and buy down whatever debt I have. I want to keep as much as possible, but the fact is, 50 acres with the house and buildings on it is where most of the sentimental and useful value lies, and if I have to sell 40, I have to sell 40.

Here's a scenario I came up with. Please give me thoughts on this:

I understand that Home equity lines of credit can allow you to take up to 80 percent out of the value of a house. Now, not all banks will do that, but there are some that might do so. Say my current house is appraised at $550 to 600 (which I think is possible). That gets me $440 to $480K and leaves only $250-290 for a traditional loan. I've got good options there. There are some good farm-related loans and I'm a veteran, so maybe some options there. The HELOC is interest only, but what sort of interest would I be looking at? It will probably bite a little hard, but if I get my house in Taylor turned around and sold relatively quickly, I can kill that and get down to just the regular loan (and maybe even buy that down).

Side note: I've found a realtor who has an investor partner who subsidizes the upgrades to flip your house, and they essentially split whatever profit they make after their upgrades. It basically allows you to flip your own house, and really works well in this area.

So what I'm doing in the above scenario is using a HELOC like a bridge loan. My perception (correct me if I'm wrong) is that my rates would be lower that way than using a bridge.

A bridge and HELOC loans are basically the seam thing. Different terms will lead to different rates.

Make sure if a loan to look at prepayment penalty's for paying off early. Factor that into your selection of lenders

Is your $550-600k home paid off? Your numbers imply it is because the 80% ltv includes your primary loan. Also, you have to do all of that before you put it on the market of I recall correctly.