Welcome to this week’s Urban Survival Newsletter, brought to you this week by Jeff Anderson’s “Collapse Survival Secrets.” If you haven’t yet, I want to strongly suggest that you check it out. He’s slashed the price on it this week and is including “Flash Mob Survival” as a free bonus. With the sheer volume of flash mobs that have been happening, including flash mobs of 40, 200, and 300! people THIS WEEK, this is incredibly timely and valuable information. To find out more, go to SurviveInPlace.com/survivesocialchaos
It’s Survival Diva here with a few tips a real estate broker won’t necessarily share. Many of us have dreams of buying property or a cabin but if you haven’t been able to afford your dream property, take heart! There may be factors you are unaware of that could make it possible sooner rather than later.
Get Your Land For Free!
Yes, you heard right! Places like Beatrice, Nebraska; Curtis, Nebraska; Marne, Iowa; and rural land dotted throughout Kansas are being offered for free in an attempt to infuse sagging populations. If you are not shy of open spaces with few amenities, and you are willing to pre-qualify for a home loan, or build a home within a certain time-frame, it’s time to do an Internet search to see what’s available.
It’s likely this trend will continue as small towns seek to draw new blood. So, what’s the catch? They want families with school age children. With each new student, these struggling communities receive increased revenue from the government for schools. They also stand to increase their coffers with property and income tax revenues. This brings up the obvious observation that you’d be moving into an area that values money from the government, and is willing to put up with the strings that are included.
The Value should be in the Property, Not the Improvement
If you have your heart set on a specific location, and a modern day run at open plains doesn’t pique your interest, there are great deals on both developed and undeveloped properties out there these days, provided you keep one simple rule in mind.
When purchasing property; it’s safest to have the larger portion of investment tied to the property, rather than in the improvement. Historically, acreage does not have a tendency to “crash” as does brick and mortar. When friends or family ask for advice about purchasing a home in the city or a suburb in today’s market, I advise against it. There is a good chance the market will continue to adjust lower than current levels. (David details a couple reasons why the real estate market is likely to correct another 40% in this article:http://www.secretsofurbansurvival.com/645/preparing–for–the–coming–real–estate–collapse/)Having said that, investing in land where you can raise farm animals and grow a garden is not the same as buying a McMansion. Property that allows you to provide for the future is more of a lifestyle choice and it offers the ability to survive whatever the economy has in mind for us in the future.
Where to Find the Best Deals on Rural Property
For Sale by Owner properties are often more affordable, provided the seller lowers the price of their property by the 6%-7% normally paid to a real estate agent. Just make sure that you do your homework when dealing with a For Sale by Owner, so the savings you realize by leaving out a professional won’t come back to bite you later on (more on this later).
Lease Purchase is on the increase and for those concerned over where the market is headed, this approach is safest. Typically, you will pay the normal first month’s payment, last month’s payment, and deposit as you would with a rental, and a portion of the monthly “rent” goes towards your down payment. The benefit of a lease-purchase is that you can live the lifestyle you choose, but should the market take a nose-dive, the price can be renegotiated before purchase. Have a professional look over the paperwork of a lease purchase before committing to it.
Raw Land is an option for a handyman who has the skills to build their own cabin or for those who plan to have their dwelling professionally built. While living in Alaska, it was common to meet homesteaders who dug basements and lived there while they built up cash and carry. Others started with a garage or small barn and utilized the space as home base while they built their home as money became available. Straw bale, adobe and cob are building methods for a do-it-yourselfer that can save an incredible amount of money.
One of the biggest upfront costs and risks of buying raw land is drilling a well. It helps to have a perk test done on the property-this is normally provided by the seller-but my advice is to request the owner pay to have the well dug and roll the costs back into the property sales contract. It takes out the guesswork.
Mortgages have never been available on raw, unimproved land, as mortgage lenders attach the improvement (home or cabin), rather than the land, should a borrower default. Before the recent real estate crash, owners often held out for a cash sale on raw land, but those days are long gone, leaving sellers open to owner-carry contracts. When negotiating the interest rate on a loan, keep in mind that the interest rate you pay the seller will be far better than what the banks are paying for interest accrued on monies sitting idly in an account. There is always room for negotiation!
(David’s note: From personal and consulting experience, there are some strange happenings in the market right now that make it MUCH less expensive to buy existing homes/buildings on land rather than buying land, doing site work, drilling a well, handling septic, power/phone tie in, (if applicable) building your house, and building other structures. When I say MUCH less, I mean that I’ve seen it half to ⅓ as expensive to buy land with existing site work, buildings, and infrastructure compared to buying raw land and building.)
Owner-Carry loans are not the same as lease purchase. They are a binding sales contracts agreed by the buyer and seller at a specific interest rate for a specified period of time. As the buyer of a property, the interest rate on an owner-carry contract can be written off at income tax time.
It’s possible to find screaming deals on Owner-Carry loans, but go into this type of real estate loan with your eyes wide open. Most of the time, you will be dealing with an honest owner who simply needs to get out from under a property. Rural settings come with greater difficulties in regard to a mortgage loan and sometimes lead to sub-prime loans, but as mortgage lenders grow increasingly weary of what they deem as risk, these types of loans have all but dried up. Sellers aware of this are moving towards the owner-carry loan when they own the property outright.
As with any business deal, there is the potential for predatory practices involving real estate that may have you headed for court. If a seller asks for interest rates that steadily climb over time, or request a balloon payment, beware! There will be more on this later under Avoiding Pitfalls.
Multi-Family Homes now make up a sizeable portion of home sales over the past few years. Groups of families have banded together to help one-another through this shaky time, and I for one applaud them. Gardening and homesteading chores may be shared, and by pooling resources, financial solvency is much more likely.
Mortgage loans for group ownership are fairly simple to do with a Tenancy In Common-but be aware that not all states allow them. When seeking such a loan, it is best to refer to an attorney to address issues as to how taxes and property improvements will be divided. It is also important to agree on inheritance issues should a member pass away.
(David’s note: I strongly discourage co-ownership of properties. Just like 50+% of marriages end in divorce, your group will probably change over time. A MUCH cleaner arrangement is to have a single owner who leases property to tenants or create a condo/townhome type arrangement where you have a combination of individually owned property and common property. A single owner arrangement will give one person control over who moves in as time moves forward and a condo arrangement may lead to an owner selling to someone against the will of the rest of the group.)
Thinking Outside the Box may lead to interesting alternatives. If you have a pioneering spirit, what about pulling a 5th Wheel on to an undeveloped property and living in it while you build your home? By selling the 5th wheel once your structure is complete, you stand to recoup the money spent on your temporary shelter. Many have done this with great financial results!
(David’s note: having been a lifetime RV’er, ranging from Class A to Class C and bumper pull to 5th wheel, you need to do an accurate and realistic initial analysis to have any hope of coming out ahead buying and selling an RV. You should expect to pay no more than 65%-70% of retail for a new RV/trailer and you should expect the price to be 50% of retail within 12 months of purchase.
If you buy used, you NEED to make painfully low offers with the understanding that the sellers you’re talking to are going to feel like they’re being sucker punched. Rest assured that the sellers will probably have received incredibly low offers from dealers already. You just need to be polite but resolute with them…show them Black Book values if you can get your hands on one…and let them know that it hurts you to only be able to offer them as much as you are, but that that’s all the market will allow.
That being said, we LOVE RV living and spend 1-3 months per year in ours. There are definite preparedness sacrifices/tweaks that you need to make, but there are some significant advantages to living in a small space as well. I wouldn’t dream of trying to “bug out” in an RV and they are definitely low security, but we love being able to travel with our kids, dogs, food, and some gear.
There’s also an opportunity for vetrans to go and do overseas security contract work for a year or go up to Canada and work on their pipelines/in their oil fields, live like a pauper for 12 months so you can save all your money, and buy something for cash at the end of the year.)
Manufactured Homes have always been a financing challenge, and have been hit hard with the current real estate downswing. Where once sub-prime loans were available for manufactured homes, they are now difficult to find as mortgage lenders grow increasingly squeamish to risk.
For the most part, manufactured homes are located in rural settings due to building codes that disallow them in many towns, cities and some suburbs; therefore great deals can be had on them in today’s market. Sellers who have paid off their mortgages and need to sell have turned to owner financing and in some cases the asking price may be pennies on the dollar.
Before you search, however, be aware that manufactured homes older than June15, 1976, were not eligible for financing even during the real estate boom and certainly will not be in the future. The problem is poor snow loads built into roof structures and issues with poor insulation. Even for those who can afford to pay cash, keep in mind, should you decide to sell your property later on, you may have a difficult time finding someone willing to hand over a chunk of cash.
Other concerns to watch for are manufactured homes that have been moved more than once or a singlewide. A manufactured home that has been moved from, say, a park to a property is disqualified from a mortgage loan. The problem that surrounds a singlewide is their history of depreciation, of which lenders are only too aware. Loans on singlewide manufactured homes are difficult to find, and when found, always come with a high interest rate.
The exception to the rule is purchasing a property that comes with a give-away trailer or manufactured home-usually dilapidated or older than June 15, 1976. This strategy works well for anyone interested in building a home or cabin that needs a roof over their head in the meantime. Be aware that once you’re through building your home, it costs upwards of $1,000 or more to move a trailer or manufactured home from the property, depending on roads and the distance involved.
(David’s note: I’ve bought nice doublewides for $1,200 and doublewides on land for $10,000. Because of the desirability of stick built homes, you can get incredible deals on manufactured homes. That being said, don’t look at them as an “investment” unless you plan on buying them cheap for cash and selling them on owner-carry notes. I have several friends who have done this out of their IRAs…basically, buying a doublewide on land for $10-$15k cash and immediately selling it owner financed for $30,000 at 12% interest with 10% down. On paper, you double to triple your money immediately and you have 50% or more of your cash back in your account within 12 months! If you do this a few times outside of your IRA, you can buy your own place for cash fairly quickly.)
Earnest Money Agreements include rights of refusal should the property not pass a home inspection or title search. Be certain to include other contingencies such as loan approval. In a case where you must sell an existing home, the earnest money agreement should include a clause stating if you are not able to sell your home within the time frame you and the seller agree on (typically 60 – 90days), your earnest money deposit is reimbursed in full.
Owners cannot be expected to watch out for your interest and they are not held to the standards of professional real estate agents. Always watch out for your interest! The amount of an earnest money down payment is negotiable, and many times, a deposit of $1,000 is sufficient to prove your interest, but no more.
Seek a Professional if you are unclear about an owner finance, lease purchases, or lease option property agreement, because once you’ve signed, it becomes a legally binding contract.
Title Insurance is relatively inexpensive for the protection it offers a buyer and should be part of a sales agreement, even when it isn’t mandatory to a sales contract. Title insurance protects you against builders liens, property tax & income tax liens, building code issues (like discovering the shed that came with the property is built partially on your neighbors land and must be moved) and it will verify that the seller is the legal owner of the property with the right to enter into the sales contract. They also check that your property in not on a floodplain, something to be avoided, as not only is your property at greater risk, floodplain insurance is usually ten times the expense of a normal homeowner’s policy.
Set up an Escrow Account so that payments you make each month have a third party involved proving payments were made and should a dispute arise, you have proof of payment. Escrow payments can usually be set up to pay homeowner’s insurance and property tax each month, which avoids the annual surprise when the full bill comes due.
Home Inspections should always be performed, even when you are paying cash or the financing is owner finance-especially when it is owner financing. It’s doubtful an owner would offer you a checklist of everything wrong with a home. To find out the substructure of your new cabin is termite-ridden or the foundation is on the verge of collapse after a purchase means untold headaches and legal battles down the road. Should a problem be revealed during a home inspection that may be repaired yourself, this is a perfect opportunity to take the amount of repair and labor off of the sales price. With hard work, you’ll be able to build instant equity in your new property.
Don’t Overpay especially in a market that hovers up and down and plummets without warning. Offering 10%-20% less on a property helps protect your investment. This is not a case of taking advantage of the seller, but rather cushioning your investment against the threat of market decline.
(David’s note: As a rule of thumb, if a deal isn’t “too good to be true” and if people aren’t saying, “there must be something wrong with it for them to sell at that price,” don’t fool yourself into thinking you got a deal. If you are willing to pay over market price or market price, that’s fine…but if you want a deal, be prepared to kiss a LOT of pigs and make sure you get a screaming deal. In a soft market with increasingly difficult mortgage underwriting, expect that you’ll need to price a house at 20-30% under market value to get it sold quickly with conventional financing, if necessary.)
Request the owner of the property pay for an appraisal, to ensure you pay no more than a property is worth. If you can’t get owner agreement, you may pay for the appraisal yourself. However, if money is tight, there is another way to determine market value of a property through title companies. Most have programs they can run in your specific area to help you determine value. Assessment departments in the area may also be able to help. When all else fails, you can approach a real estate agent and trade their expertise for a modest gift certificate to their favorite restaurant.
Credit Rating Doesn’t Always Compute with owner finance, and it’s not uncommon for the transaction to be done without a credit check. For many, short-term financial hiccups led to dings in credit rating, but in this case, the seller is more concerned with the down payment made to their property. The larger the down payment, the less likely it is that you will default on the loan. Buyer default returns ownership to the seller. Any improvements made to the property, monthly payments, and down payments are kept by the seller, leaving the original owner free to resell the property. For this reason, it is wise to negotiate a cushion of time before the default process takes effect, which can be written into the sales contract should you lose a job or suffer a temporary setback.
Balloon Payments can be a death keel to a property owner when they come due! For instance, should you agree to a balloon payment 5 years from the original property sale agreement, you must either secure a loan or pay cash to the owner by the date agreed upon. Considering rural home loans are getting harder to find, and there is no way of knowing what the state of the market will be at that 5-year mark, you stand the chance of losing the property if you are unable to find a loan or produce cash. This would put you in default and any improvements, payments and down payment is retained by the seller, leaving them free to resell the property.
Don’t Agree to Sliding Interest Rates as many times they are a “hook” to reel in buyers. It is easy to get distracted by that “perfect” property and ignore the ramifications of a sliding interest rate that steadily climbs. This practice makes it easy to pay the property payments at the beginning of the contract, but may force you to refinance soon after, or lose the property.
“Grand fathered” Properties are properties built before new building codes and thus excused from new regulations until changes are made. Therefore, should you find that jewel of a cabin overlooking the lake as perfect once a second story is added, better look before you leap! Should you attempt to do an addition on a grand fathered property, you may find that your jewel of a cabin just became a noose around your neck.
David’s closing remarks:
You might wonder why a site with “Urban” in it’s name is covering buying land…here’s why. The point of creating the SurviveInPlace.com course was to give people a roadmap to increase their survivability, regardless of where reality placed them when disaster happens. Whether it’s in the sticks or in the middle of downtown Detroit, the SIP course lays out how to increase your chances of surviving in place when relocating to a better position isn’t an option. In a catastrophic disaster situation that happens suddenly, the window of opportunity for bugging out is SO short that you’d better be prepared to “bloom where you’re planted” (aka…SurviveInPlace).
That being said, many people are hungrily trying to figure out how to cushion themselves from the risks of terrorist attacks, tax and economic fluctuations, and increasing food prices and are trying to strategically relocate to more rural places before a sudden catastrophic disaster hits in the hopes that they’ll be more resilient to these risks.
In addition, many people are, like John Galt in Atlas Shrugged, sick of fighting the system and are strategically relocating to more rural areas to change gears and become more self-sufficient.
In short, I was excited that Barbara wanted to talk about this because most, if not all urban preppers would like to either get “some more land” or out-and-out move to the country. A big chunk of my audience will remain tied to urban areas…to be close to a VA hospital, for other medical needs, to earn a living, or because of family. Despite all of the overly discussed shortcomings of urban areas, they’re still the best or only answer for many families.
With that, what are your thoughts on strategically relocating to a location with land? Any thoughts or experience with land patents or mining claims? How about creative ways to make the transition from urban living to more rural living? Share your thoughts by commenting below:
And, if you haven’t yet, I want to strongly suggest that you check out Jeff Anderson’s “Collapse Survival Secrets.” He’s slashed the price on it this week and is including “Flash Mob Survival” as a free bonus. With the sheer volume of flash mobs that have been happening, including flash mobs of 40, 200, and 300! people THIS WEEK, this is incredibly timely and valuable information. To find out more, go to SurviveInPlace.com/survivesocialchaos
God Bless & Stay Safe,
Survival Diva and David Morris