Monday, October 26, 2015

Tips for Picking Your Forever Homestead



In this episode we will be giving you some tips for finding your forever homestead. If you use these steps you will have a better picture of the property you are looking for. These tips will make the selection process much easier.



So you have decided that you want to be a homesteader?  How do you get started? How do you go about finding the land you want? What are some things I should be on the look out for? How do I go about the decision making process? In this episode we will not be talking specifically about soils and orientation, that will come a little later, but we will be talking about the mechanics of making a decision based on your situation at hand. We will specifically be talking about smaller plots of land. All of these same suggestions apply to larger amounts of land, but the smaller the plot, the more critical these become.

Lists

 

Wish List

 

I believe that everyone should do this step. This is where you list the things that would be on your perfect homestead. This list should include the amount of land and percentages of what you want on that land. Here is my wish list.
  • Between 10 and 20 acres
  • Medium sized home in good condition
  • Wood lot that is at least 1/10 of the total property but not greater than 1/4 (20 acres would have a minimum of 2 acres of wood lot and a maximum of 5 acres)
  • Pond that is around 1/20 of the total (10 acre property would have 1/2 acre pond.)
  • Moderately level land or gently rolling hills.
  • Good quality well
  • Within 20 miles of a small town
  • Pasture and garden spot
  • A decent barn
I could keep going, but this gives you a good idea. This list is the perfect image in your mind. Be as detailed as possible. This becomes even more important if you have the option of moving from state to state or from one agricultural zone to another.

If you are married, you and your spouse need to make your own list and you need to review each others lists. You will probably find at least a few things that are the same or similar and you are going to find some things that are in conflict.This is normal.

Must Haves

 

Must haves are the things that if a property doesn't have you shouldn't even look at that property.  Your must haves shouldn't be a perfect copy of your wish list. There has to be some flexibility in your selection process. Again this is a list that should be completed by your spouse and yourself and compared to each other. Hopefully you will not find any fatal differences in the two lists.

My must haves list is much shorter than my wish list and yours should be as well.
  • At least 5 acres
  • Reliable access to property
  • At least 2 acres of cultivatable land
  • At least 4 miles outside of a small town
  • Not closer than 30 minutes to a large town or city
  • Reliable high speed internet
You see there is a massive difference between the wish list and the must haves. This will help you eliminate properties and narrow down the list of possibilities.

Deal Breakers

 

This may sound like an identical list to the must haves, but it really isn't. These are the things that if the property does have or doesn't have that immediately remove it from consideration. Again you and your spouse should come up with your own lists independently then compare the two. Here are just a few of my deal breakers.

  • Kudzu anywhere on the property
  • Soil too rocky
  • Signs of environmental contamination
  • Currently in operation as industrial agriculture

Both You and Your Spouse Have Veto Rights

 

A couple of years ago my wife and I looked at a piece of property. It met all of the requirements of my must haves and even several items on my wish list. I could have done everything I wanted to do on the property. It would have taken a lot of work, but it could have been done.

There were two homes on the property and a really cool old barn. The barn would have had to be completely torn down and rebuilt and the two homes had been broken into and all of the copper wiring that could be easily gotten had been stripped.  This instantly called into question the safety of the community. This in conjunction with the work that would have to be done to make either house livable took this property completely off the table. Actually just the theft alone made my wife veto the property. Was it perfect otherwise? Nope, but it could have been made to work, that just wasn't good enough. If either person is unsatisfied, neither will be happy.

Compromise

Now that you have these lists completed and have looked at each other's lists you can begin the conversation. Notice at this point you shouldn't have looked at a single piece of property. Hopefully there will be common ground between your partner and your lists. If not,  stop right there and begin to try to find common ground. This can be an arduous task, but many times it doesn't have to be.

My wife's list looks somewhat different than mine, but it looks more like mine today than it did three years ago, but mine looks more like hers too. Neither one of us has given up everything on our list for the sake of the other. You know what? Neither of us should. If one person gives completely into the other's desires when it comes to property, resentment will follow. It won't matter if you have the finest homestead around if you are not happy at home.

Be Patient

If you are looking for your forever home and you currently have a place to live, DO NOT get in a hurry. Unless you are really frugal and lucky, you will have to have a mortgage on this place of anywhere from 15 to 30 years. Take your time and don't settle for something that has a deal breaker or something that doesn't have all of your and your spouse's must haves. You should be hoping to be on your homestead for a very long time. Don't rush it.



Know Your Budget


It really doesn't matter if you find the perfect place if it is a place that you simply can't afford.  Knowing your budget puts the power in your hands and I am not talking about what the bank will loan you.

A Mortgage


For most purchases you will have to have a down payment. For a standard FHA loan the down payment is around 3.5%. An FHA loan requires either an existing home or for construction to be completed within a certain time frame to qualify. FHA doesn't make the loan. FHA guarantees all or part of the principle of a mortgage to the lender. What this does is either gives the borrower a better interest rate or a higher amount that can be borrowed and many times both.

A loan for open land is many times considered a commercial loan or in some cases a speculative loan. Down payments for these types of loans range anywhere from 10 to 50%. Why the big difference? Well to be blunt, if you don't have a primary residence (I am talking conventional housing here), it is easier for you to walk away from the loan. This makes these types of loans more risky than a home loan. Interest rates will be higher for a land only purchase.

Alternative Financing


You may find that traditional financing is not a viable option. You can look to some alternative financing. I have heard of many people doing owner finance. This could be an option for you.
WARNING!!!!!!! Read the contract. Have an attorney read the contract. I have known disreputable land owners who have sold the same piece of property three times because they were able to foreclose. Some of these contracts are not good, but if you sign them, you are bound by its provisions.
Around here owner financing is not uncommon. The terms are fairly standard. At least 10% down, 9.9% interest rate, and 10 years to pay. These terms can be negotiated, but this is common. No matter what owner financing tends to be at a higher interest rate than what you would expect to receive at the bank, if the bank would loan the money to you.

Many retirement plans have the ability for you to borrow money from yourself and pay it back. Some retirement funds require you to pay the money back within 5 years. This can be really tough and if you leave your job you may have to pay the remaining balance in full.

I know a few people who have cashed out their retirement completely so they could buy property outright. When a person does this they must pay taxes and penalties. In some situations this may be a good idea, but I would take the time to talk to an accountant or tax attorney before I did this.


Looking at Properties

A Real Estate Agent


Talk to a couple of agents before you decide on one. After you have settled on an agent combine the lists of your spouse and yourself. Your agent should have a copy of your must haves and your deal breakers list. This should help them refine their search to help you find properties. If an agent shows you a property that either doesn't have all of your must haves or has any of your deal breakers, talk to the agent and tell them to look at your lists again. If the agent shows you a second property that doesn't meet your minimums, fire that agent and find another.

Be sure and ask about the properties zoning. Zoning is limitations placed on what an owner can do on a property by local governments. Here rural land has no zoning at all, but I know that there are states where all land has zoning requirements. Be sure to ask.

It is difficult for some agents to wrap their mind around the things that a homestead minded person wants. Most agents are accustomed to people who really don't want to do anything productive with their land. They are simply looking for convience, school districts, and general aesthetics.  While these things can be important to a homesteader usability is more important.

Limit the Number of Properties in Consideration


Using your agent you should be able to reduce the number of properties to be considered to five or fewer without having to step foot on a property. Once you have reduced the possibilities to this number you can start actually walking the properties. Have your lists with you. As you walk the property refer to your lists. DO NOT ALLOW EMOTIONS TO BE INVOLVED WITH THIS DECISION!!! If a place has a picture perfect pond or a quaint little house and you allow yourself to fixate on that point you will overlook things that could make this particular property wrong for you. Be as objective as you can. Take notes. Ask about land lines. Make sure there has been a survey and a title search.

Walking a property can push it up to the top of the list or eliminate is completely. Both possible outcomes are fine. This is just part of the process. At this point you should walk a minimum of three and a maximum of five properties.  Why a maximum of five? If we have too many options at this point we tend to compare the options to each other instead of comparing them to our lists. At this point we should only be comparing to the lists.

Take lots of pictures of each property you walk. This will help you in the next step.

Develop a Plan for Each Property


This one can be a little challenging. If the property has clearly defined borders, like a wooded fence line you can use Google Maps to have an aerial view of the property. If it doesn't, you can go to the county revenue department's website where the property is located. They will have an interactive map that will show approximate land lines. In order to find the property you are considering you will either need the owner's name or the parcel number. This will give you an aerial photo of the property with property lines. (You may have to select aerial view in a drop down menu). These sites allow you to print the photo of the property.


Once you have an aerial map of the property with property lines, you can take this along with the photos of this individual piece of property and develop a draft plan for that property. This plan doesn't have to be in great detail, but it will give you an idea of what should go where and how everything will fit. You may just find that one of the properties will fit better with what you are wanting to accomplish than others. This is good and you are working forward in the process with a plan in place.


Make Your Choice

 

If you have taken all of these steps, you will be in a good position to make your choice. You already have a preliminary  plan in place, you have already done your research on financing, made sure the title was clear, made sure the zoning is the way you need. You will be ready to make your offer.

I hope this helps you pursue your dream and it helps you find a forever homestead that you and your spouse can be proud of.

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