Stormy Kromer
Thinks s/he gets paid by the post
- Joined
- Oct 1, 2017
- Messages
- 1,159
Almost 40 years ago my father & I bought an 80 acre farm that included a house & modest building site. Father passed 4 years ago and now I am the owner.
My 25 year old son would like to buy the house & building site portion, it accounts for about 6 acres of the 80 acre total. He would live there as his primary home. I would keep the remaining farmland and continue to rent it to a local farmer, that cashflows nicely.
I had the whole farm (80 acres with house and buildings) appraised in 2015, the appraisers comments were that the buildings added no value to the farm, and in fact it would be worth more of the buildings weren't there at all and it was all farmland. The farm was appraised at a little over $6,000 per acre. If I were to sell the entire 80 to a big farmer they would likely tear down the buildings and farm over them.
I would like to sell the house and buildings since they produce no net income. I let a neighbor live there rent free just for taking care of the place and paying the utilities. I would actually be money ahead if I would give the building site away for free to DS, but I know the IRS has rules about that and I want to be fair to our other child. Plus, my son wants to buy it and assume ownership, he wants to earn it himself.
My question is two part. First, in valuing the 6 acre building site do you think I could use the 2015 appraisal and value the building site based on the price per acre and the 6 acres that the building site is on ? EG: 6 acres @ $6,000 per acre = $36,000. Or, do you think the IRS would require a new appraisal on just the building site since it is a sale to a relative ? I really don't want to pay $1,500 or more for another appraisal. The farm just across the road sold for $6,000 per acre earlier this year, so that figure is still accurate.
Second question. I would be selling the place to him on a 30 year contract for deed with $0 down. I know that I have to charge a certain interest rate for the IRS. I don't know where to find what that rate is ? I was thinking of just looking online for the average 30 year rate and using that.
I would appreciate any advice or suggestions from the forum's experience. Thank you.
My 25 year old son would like to buy the house & building site portion, it accounts for about 6 acres of the 80 acre total. He would live there as his primary home. I would keep the remaining farmland and continue to rent it to a local farmer, that cashflows nicely.
I had the whole farm (80 acres with house and buildings) appraised in 2015, the appraisers comments were that the buildings added no value to the farm, and in fact it would be worth more of the buildings weren't there at all and it was all farmland. The farm was appraised at a little over $6,000 per acre. If I were to sell the entire 80 to a big farmer they would likely tear down the buildings and farm over them.
I would like to sell the house and buildings since they produce no net income. I let a neighbor live there rent free just for taking care of the place and paying the utilities. I would actually be money ahead if I would give the building site away for free to DS, but I know the IRS has rules about that and I want to be fair to our other child. Plus, my son wants to buy it and assume ownership, he wants to earn it himself.
My question is two part. First, in valuing the 6 acre building site do you think I could use the 2015 appraisal and value the building site based on the price per acre and the 6 acres that the building site is on ? EG: 6 acres @ $6,000 per acre = $36,000. Or, do you think the IRS would require a new appraisal on just the building site since it is a sale to a relative ? I really don't want to pay $1,500 or more for another appraisal. The farm just across the road sold for $6,000 per acre earlier this year, so that figure is still accurate.
Second question. I would be selling the place to him on a 30 year contract for deed with $0 down. I know that I have to charge a certain interest rate for the IRS. I don't know where to find what that rate is ? I was thinking of just looking online for the average 30 year rate and using that.
I would appreciate any advice or suggestions from the forum's experience. Thank you.
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