What to do?

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TreeGap's picture
TreeGap
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What to do?

I'm new here & this is my first post.

I come to the Crash Forum after slowly having it dawn on me that things are unravelling.  Last September, after the 10th anniversary, I began looking more deeply at the events of 911.  A dear friend of mine died that day & I wanted to understand what'd happened.  I was still having a difficult time accepting it.  I'd spent the decade largely without a TV and had been without Internet connection since 2009. 

As I looked into understanding the events of 911, I learned more than I bargained for in terms of our global economy.  I've had days of feeling totally freaked-out. I have two young children I need to provide for.  I am now trying to prepare, i.e. the Crash Course.  Although, my preparation thus far has been more intellectual than really absorbing it fully.  But as Life would have it, I was somehow preparing all along without even knowing I was doing it.

Now, I'm at a crossroads.  I need to make a decision and I want to run it by people who are looking at the big picture. 

In 2009, I moved to a rural community where I have been learning community gardening, working at the local Store, raising my kids, living simply, building community, etc.  I moved here for the schools and to live in a more sane part of the world.  This, however unplanned, is where my roots are being planted. 

The problem is, I had started my roots elsewhere, in the next town.  My husband and I had purchased land: 15.5, southwest-facing acres (solar energy) that abuts 300-acres of protected farmland.  On the protected parcel is an organic CSA Vegetable Farm.  My husband had started a "farmhouse" on the property, but it is not finished.  Needs finish electric, a kitchen, insulation, drywall, heat & some trim work.  With a woodstove & kerosene for back-up & Craigslist finds, it is about $30,000 from being habitable year-round.

I am torn between selling the property at a discount to get the equity out in order to ease my Life now & begin the work of finding a homestead in the town I am now living.  I am currently renting a nice house & don't forsee living in the "farmhouse" fulltime as that town does not have a public school system I want my kids attending.  The only thing is, I fear I won't time things right in re-purchasing & I'll be locked-out of landownership by inflation.  I don't like to make decisions based on fear, but this is feeling very real to me.  The earliest I would qualify for a new loan to finish the house/and/or buy a new one, is early next year.

Should I let go of land with a potentially energy-efficient-independent homestead to purchase a similar property in my current town?  To purchase a new house, I would need to assume debt of at least $250,000.  To complete & keep my "farmhouse," I would have debt at a level of less than $50,000... possibly less.  Given the economic instability, I have serious doubts about assuming so much debt to purchase a new house.

Buying a house in our current town would make thing easier in the short term, getting us of the instability of a rental.  But, long term?  I wonder if it increases our instability.

Also, I've read here that inflation can inflate away debt.  I do not understand that.  Can someone explain?

TreeGap's picture
TreeGap
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Understand the Inflation/Mortgage relationship

Just read the thread on Inflation & Mortgages.  Understand that now.  So, no need to get repeat that discussion.

Wendy S. Delmater's picture
Wendy S. Delmater
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Welcome, TreeGap

Glad you found us.

My personal opinion is that debt should be avoided at all costs. I would not take on a big mortgage for many reasons: possibility of losing a job, uncertainty about healthcare and possible loss of income due to bad health, the fact that you will need money for 'projects' (like solar panels, a root cellar, or building a deep larder) but a big mortgage payent will make those harder, and the sad fact that when currencies are devalued debt sometimes is not devalued. If I were you I'd very carefully screen a business partner to run the 300-acre CSA in your absence and use it as a place to go to when and if things fall apart. Make sure the business partner is on-board with prepping and you'd have an ally or two if you needed to do any home defense. Please read the information by people who survived the upheaval in Bosnia to see how larger familes and groups did beter than small ones.

Anyhow, at least use a tenant farmer or lease out the land to someone who will practice oraganic farming. That way the land would get worked. Idle farmland gets small trees and all sorts of brush and needs to be re-cleared at great expense. I was just at a family meeting here in semi-rural SC and the elders hold a great deal of farmland that they rent out at $40 an acre: they were adamant about it not sitting idle and they would know.

Yes it does sound like you were making incredibly good moves before you formally 'saw' where things seem to be headed. I'm sure you'll get other advice from the great members of this community, but mine is to take a breather and do a pro vs cons list of your two options, but then brainstorm on 'outside the box' solutions. One idea might be to start a food coop in the town you rent with the produce made on your farm. I'm sure the members of the CM community will come up with other suggestions. None of us is as smart as all of us and there are some very smart people here.

TreeGap's picture
TreeGap
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Thank you

Hi Safewrite,

I appreciate your response!  I didn't make it clear that the 300-acre parcel with the working CSA is a neighboring property...  Wish it was part of my land, but it is not.  I mentioned it purely for the fact that there is good access to agricultural knowledge & potential to partnership. 

Sorry I didn't make this clearer in my post! 

My parcel is 15.5 acres of former farmland & timber (with the some of the scrubby growth you spoke of on the open pasture).  I have thought of leasing the property to someone who could get it winterized & had an interest in working the land. Having not done this type of thing before, would not know where to look for resources to structure such a contract.

I do agree with you about incurring additonal debt.  My gut says, "Don't do it."  Then, I think "out of the box" and come up with a scenario where I will rent in the town I am currently living for the next 10 years 'till my kids are out of High School.  Then, move 1 mile down the road (literally) to our little house with a big yard.  There is a part of me—the one that has lived in a world where having a mortgage of $250,000 wasn't considered too large—that reacts to this scenario as lunacy.  That solution might make sense when considering the long view, but with so many people (everyone I know) not grasping the implications of Peak Oil...  it is just a crazy way to raise kids.  In a "stable" society, you'd just sell one house & purchase one in the town you want to live in. 

In doing my pro/con list, I have to include my thoughts about the house I'm currently living in (the one I would need to incur $250,000 in debt to buy).  It is a 1300 sf. cape, optimized for energy efficiency & passive solar, that sits on a 3-acre open knoll with an irrigated vegetable garden.  The house also has a small barn in which sits a generator to power the house via underground cables during power outages (possible idea for the barn to be an energy center, solar, etc).  The total land is 10 acres with mostly woods on sloping hillsides. 

In my view, this house is 80% where it needs to be for the coming changes.  In contrast, the property I own has a long ways to go to be equal... which means time, sweat equity (lots of it) and money.

I could put a large downpayment on this house which would decrease the total loan amount, but it would still be at least $150,000.  Also, wonder at the wisdom of that i.e. being cash poor given the deflation/inflation issues.  (Which I'm still trying to understand.)

Job stability is something I can't predict and feel like it is a huge gamble to "hope for the best."

I agree that there are smart people here & I value the input. 

Welcome other thoughts & suggestions from the CM community!

 

 

 

Tycer's picture
Tycer
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Posts: 601
 You could lease your

 You could lease your property for a dollar and let some young farmer graze or farm it. If you own it, keep it. If you like where you are and someone else is responsible for the upkeep, maintenance, taxes, insurance etc. keep renting and do what you can on the property residence as cash allows. My 2¢

TreeGap's picture
TreeGap
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Thank you Tycer, Your 2cents

Thank you Tycer,

Your 2cents (can't find the cent key on my keyboard!) comes at a good time.  Have been mulling all this over & thinking the solution needs to be more simple.  My mental gymnastics to make it work are just crazy-making.

Complicated things tend to fall apart/not pan out due to the time it takes to unfold—thus allowing other variables to come into play & mess-up a "plan."

Will think on this one.  That would relieve the financial burden somewhat & move things forward.

Thank you.

jrf29's picture
jrf29
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Posts: 453
Take it slow

Yes, keep it simple.  Two hundred thousand dollars of debt is an insane amount, particularly in a rural area.  If you're working at an insecure wage job, don't even entertain the thought.  What happens if unemployment strikes after 10 years?  The whole property and everything you put into it goes up in smoke.

If our economy does go downhill (which is what you're preparing for), the very first thing that will happen is that either or both of you will lose your jobs.  Your number-one priority is to build resiliency into your life.  Plan for the unexpected.  Plan for you or your husband losing work and being unable to find a new job for months (or more than a year).

Most modern Americans keep pitifully little savings.  They think three months is enough.  Go to your local library, and take out a book on thrift from the 1930's.  See what it says:

George McCullough wrote:

Those who learn from the mistakes of others weave for themselves an impenetrable coat of mail.  Thousands of men have been out of work for many months, and then compelled to take a new job at far smaller pay than was earned in the one they had lost.

An unemployment reserve fund is necessary.  It should be large enough to enable a family to live for one year without work.  An amount equal to two-thirds of the total annual income should be put into savings.  When unemployed, the average family can live on one-half to two-thirds of the amount to which it has been accustomed, especially if there is space one can raise vegetables, perhaps also a few chickens and rabbits.

- "How to Spend Your Money," by George McCullough, pg. 104. Copyright 1931.

Structure your family finances now so that you will be resilient, so that you can survive setbacks.  Make sure that you'll be able to pay the property taxes on that farmhouse of yours if you lose your jobs.  This does not mean hoarding, but it means making a gradual and intelligent effort toward reducing expenses and saving.  Once you have the savings, then you can worry about how to protect it from inflation.

Resiliency involves investing.  Investing in things like your existing property.  It is not in an ideal location, but it's an asset that you own.  I'd recommend finishing that farmhouse.  No rush:  You own the land.  You own the buiding.  It's an asset that's not going anywhere.  You have plenty of time to decide whether you want to live there, rent it, or sell it. (On the other hand, if you take out a $200,000 mortgage, all you'll "own" is debt).

 

jrf29's picture
jrf29
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Posts: 453
Oh, the farmhouse

As for the farmhouse:

The suggestion that you lease the land for $1 is an idea so bad that it makes my hair stand on end.  The transfer of that one single dollar will create a leasehold estate, and clothe the tenant with a variety of legal rights as lessor of the land. You would then have to go through a complicated court procedure to eject the lessee, if it should ever come to that. The transfer of consideration ($1) creates a binding contract, which is exactly what you want to avoid. 

On the other hand, if you only give written permission to stay at your house (under certain specified conditions), then they are a mere visitor.  A "licensee" in the words of the law, and may be asked to leave at any time for any reason.  Make sure that you take no money, cash no checks, receive no consideration, or do anything else that implies the existence of a contract between you and that person.

If you are going to lease out the property, then do it for real.  Do it for a substantial sum, and have a proper lease contract drafted.  A form contract taken off the internet will get you nowhere:  there are many laws (both ancient and new) which govern the landlord/tenant relationship, they are different in each state, and when it comes to land law courts are formalistic and strict.  Do your homework: many states prohibit the leasing of residential premises which are not fitted out with proper heat, hot water, etc.  It is possible that you could get around this by leasing the land on which the house sits, it being expressly understood that the house is not warrantied to be habitable.  Many states also have laws prohibiting landlords from transferring costs (utilities, fuel oil, etc) to a tenant unless strict procedures are followed. Maybe you could rent the land (and not the house) for farming.   Being a landlord is a real job requiring real expertise- don't go into it unless you know what you are doing.  Take your time.

And that advice goes for everything: don't rush.  There is always time to make a leisurely, carefully considered decision because any decision made in haste, or made in fear, will usually turn out to have been a bad one.

TreeGap's picture
TreeGap
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Great Input

jrf29,

Thank you for the "don't rush" advice.  I do feel panicked at times. 

In my initial post, I wrote " To complete & keep my "farmhouse," I would have debt at a level of less than $50,000... possibly less."  What I didn't clarify was that I have a mortgage of $33,000 on this property. 

Have been thinking of this in light of the wisdom of having a year's worth of living expenses.  It would be a real financial stretch for me to save on what I'm making now, paying rent & a mortgage.  Yes, I could lease the land with a real contract for real money.  But, that could become unenforceable should the leasee lose his/her job.

As you said, I don't actually "own" this land.  I'm close, but the reality is I "own" a $33,000 mortgage.  I pay $400/month for the mortgage with property taxes placed in an escrow.  The property has a lot of equity in it.  Enough for the year of living expenses, three actually.

Much as I hate to be "landless," wondering if the best thing to do is to "reboot."  Sell the land with the farmhouse.  Get the cash.  Be debt free.  Invest in PMs.  Then, if things really go bonkers I would have resources to purchase a parcel of land for cash.

I would really like to begin the work of establishing our own garden, fitting a house for energy efficiency & alternative energy.  But, I don't have the cash flow to make that happen with the farmhouse on a quick pace. 

I so completely appreciate the feedback I've gotten here.  My goal is to build resiliency for my family and happy I can freely discuss that here.

TreeGap's picture
TreeGap
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Posts: 23
Update

Posting an update.

The house I was interested in purchasing is being sold to another Buyer.  A dissapointment, sort of.

I am moving forward on winterizing the 16x16 ell of the "farmhouse" in order to rent it out & generate income from that property.  It will be a lot of DIY work, but I'm relieved.  In my gut, it is not right to sell it.  I don't know why, it could just be a matter of timing & having no other homestead present itself as the clear & better option.

Thank you everyone for all your responses.  You were amazingly generous with your insight & I appreciate it!

I'll be busy this Spring & Summer insulating, installing flooring, and all manner of DIY as I move to create a lower-end version of this:

 

Will be searching the forums for this kind of info!!

Thank you!

TreeGap's picture
TreeGap
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Posts: 23
Complex is as Complex does

Yes.  To my ears, too.

Life does that. 

You make decisions. 

You make mistakes. 

The economy tanks. 

An even more-tanked economy looms.

You have loved ones to house & feed.

"What if's" take you down a million roads, not all of them are tree-lined and lovely.

Even the simplest plan gets complicated when you're shifting a Life—and its resources—from a future that no longer exists.

Yes, it is wise to take my time.

 

P.S. From the link, I gather you lean toward the simplicity of an RV?  ; ).

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