Land partnership

[Brian662]

Strongly considering entering into an agreement with a friend on a parcel of land. I can't afford the whole thing and it very nearly borders my best property. I can't stomach the thought of it selling to a group of four or more guys who don't practice some version of QDM, so I've decided to bring on a "partner".

Who has bought land with a group or partner? What were some pros/cons and what type of stuff do we need to get squared away before hand?
My friend has a 20 year old son and my son is 7, so we both will have a +1 in regards to the land. He agreed that we were the only ones (the four of us) that will be hunting. Obviously want to split costs down the middle as much as possible. I already have the tractor and food plot equipment at my place, but my friend has a skid loader, so that agreement may settle itself. What is a good way to write in buy out options in case one party wants out? He mentioned a 5% increase in value every year and I said fair market value at the time of the buy out. We still have to hammer out the details a little, but he's a good friend, and I trust his judgment on deer. I am a little worried if him and his son come out to hunt that I'll feel pressured to hunt my neighboring land to stay out of their way, even if I wanted to hunt the joint property.

Lots to think about. What else am I missing?

 

[SD51555]

Mexican standoff clause. If one wants to buy out the other and low balls the partner, the partner can reject it and take their half for the same offer price. It ensures fair play in offers and provides a way out. I wouldn't commit to any set increase in value. No telling where that land value could go, and if you undershoot it or overshoot it, someone is gonna lose.

 

[Turkish]

Strongly considering entering into an agreement with a friend on a parcel of land. I can't afford the whole thing and it very nearly borders my best property. I can't stomach the thought of it selling to a group of four or more guys who don't practice some version of QDM, so I've decided to bring on a "partner".

Who has bought land with a group or partner? What were some pros/cons and what type of stuff do we need to get squared away before hand?
My friend has a 20 year old son and my son is 7, so we both will have a +1 in regards to the land. He agreed that we were the only ones (the four of us) that will be hunting. Obviously want to split costs down the middle as much as possible. I already have the tractor and food plot equipment at my place, but my friend has a skid loader, so that agreement may settle itself. What is a good way to write in buy out options in case one party wants out? He mentioned a 5% increase in value every year and I said fair market value at the time of the buy out. We still have to hammer out the details a little, but he's a good friend, and I trust his judgment on deer. I am a little worried if him and his son come out to hunt that I'll feel pressured to hunt my neighboring land to stay out of their way, even if I wanted to hunt the joint property.

Lots to think about. What else am I missing?

Always an interesting topic. I’ve thought about it some and got close on one occasion. One recommendation I’ve heard that made sense is to have a discrete duration for the partnership. Plan needs to be to liquidate or buy out at some point in time.

 

[Doublewide]

I'd be looking for a way to split the parcel and each having your own ownership of that specific piece. There is no way I would partnership on land or a business, things can go south in a hurry, we've all seen it...

 

[Howboutthemdawgs]

Only you know the situation but I have a couple friends who are a lot like me in regards to hunting and management, and I could never partnership with them in my main land. In business, absolutely, but my land is my passion. Though…if i had other parcels and it meant keeping something under my “control” in the neighborhood that could be a horse of a different color. The kid angle was always the one that got me hung up. I feel like two adult good friends can generally agree on things and make rational decisions but the second you enter kids into the equation all bets are off. Someone wants to bring a best buddy, a kid wants to shoot a smaller buck, a kid wants ride four wheeler with his buddies in the offseason, etc. Things become tricky with the kid angle and awkward to confront.
All that said if you can swing half, it protects your neighborhood, and you have an appreciable asset, even if you dont hunt it a ton it may benefit you more than hamper you.

 

[MadMadHoosier]

There is no way I would partnership on land or a business, things can go south in a hurry, we've all seen it...

Yep, partnerships are harder than marriages! And if you each own 50% it can really get ugly. As good as my business partnership started, it ended kinda sour. But luckily I owned 51% and could prevent a complete lock down. We finally settled with what our attorney called a "reverse Chinese auction" (and what SD51555 called a Mexican standoff clause). A written contract where the 49% partner made an offer to buy my half - and I could either accept his offer - or flip it and buy his half for the same price. Keeps the offer honest, or gives you a chance to flip it for a low-ball offer. Good luck.

 

[Mortenson]

How close to "very nearly" bordering is it? If it did border you, or easily could someday, I'd see if it could be divided, with you getting the more nearby half. Any chance of that? Or doesn't lay out properly?

 

[Brian662]

How close to "very nearly" bordering is it? If it did border you, or easily could someday, I'd see if it could be divided, with you getting the more nearby half. Any chance of that? Or doesn't lay out properly?

250 yards of a small property separates this potential purchase and my current property. The access to this property is from a road, and to split the parcels would require someone to have an easement through the other's parcel, so pretty unlikely. I wish it were more cut and dry to how to handle a split because that's an option I would prefer.

 

[Tree Spud]

I have been a joint owner in 2 land agreements and a partner in a business I just sold. All 3 were very interesting experiences.

A buyout clause is fine, but even those can be tricky and usually become contentious. The question becomes how do you determine value? There really is no way to come up with fair market value on recreational land. Probably the best is right of first refusal. At time of sale you either agreement to a purchase price, or the party selling their interest goes out and get a written offer to purchase from a 3rd party. You either match the offer or he can sell it. You can have requirements put in to qualify the 3rd party's offer such as amount of earnest money, proof of funds, etc. The problem is you can lose control of who your partner is.

The bigger concerns are what goes on while owning it jointly? You will need an operating agreement created to limit use. How many hunters, # of stands and locations, can it be subleased, property work (trails, food plot locations, cutting trees, etc.). Will you have required work days? Ho do you handle target bucks, what restrictions on what can be shot, etc.? What happens to the owner share should that partner die, or gets divorced?

Regarding the financial aspect, you will probably need to consider setting up an LLC (or some type of legal partnership agreement). How is the property being purchased and how do the partners cover their share of the purchase? What happens if one partner defaults on his debt obligation related to the property purchase. Can a partner leverage his interest equity for a personal loan? How are disputes handled? What happens if someone gets injured on the property? There should be minimum required annual dues to cover taxes, insurance (for the property and each party), food plot costs, acctg & legal fees, etc.

Don't discount the "wife" factor. Both of you are taking personal family funds and investing in a property. Wives' can become an issue as they see family $$ going to something they may not benefit from. In my business, my partner's wife created some real issues.

This might work, but there is an equal chance it won't as people begin to disagree about use, whose putting the work in, use of the property, costs, etc. and petty resentments begin to emerge. You both should sit down with an attorney (at the same time), and have them walk you through the partnership approach. A good partnership operating agreement, a set of bylaws, and funds required (dues) for annual operation would be required at a minimum in my mind.

As you said, lots to think about. End of the day is a deer worth damaging a good friendship? Good deeds and good intentions are usually forgotten once you enter the partnership. Having things in writing can solve a lot of problems.

 

[Natty Bumppo]

How good of a friend? Like has been already mentioned...a lot can go wrong. I entered into a very small and minor agreement with my BIL on some land I purchased last year and it already got weird. My BIL got his trousers all bunched up about something. In the end it was an easy escape for me and I cut ties. But that was with a family member I've known for 20 years. I don't know...I'd think very long and hard about this. Or just get a very good lawyer involved and make sure everything is laid out on the table before you commit.

 

[Brian662]

He is a good friend, financially stable, has the same goals in mind for trophy deer management and doe management.

His wife could be a problem. There will be a timber sale on the property after (if) we purchase and he already mentioned not bringing it up to his wife so that we could use that money for trails and improvements without her complaints.

Due to the nature of the purchase, we are contemplating him buying the property outright (he has the financial resources) and me buying back half from him after the close. This would make the purchase less messy with the current owner. I'll admit this would be the easiest option but leaves me open for getting screwed.

The other issue is access. Bottom access from the road is tricky. My property is bottom access as well but my trail system and property design allow me to get to the top pretty clean. I have secured permission from the adjoining neighbor to access this potential property from his top on our adjoining line. This gives me the ability to access our "new" property in ways my partner couldn't, which could be problematic.

 

[Turkish]

Strongly considering entering into an agreement with a friend on a parcel of land. I can't afford the whole thing and it very nearly borders my best property. I can't stomach the thought of it selling to a group of four or more guys who don't practice some version of QDM, so I've decided to bring on a "partner".

Who has bought land with a group or partner? What were some pros/cons and what type of stuff do we need to get squared away before hand?
My friend has a 20 year old son and my son is 7, so we both will have a +1 in regards to the land. He agreed that we were the only ones (the four of us) that will be hunting. Obviously want to split costs down the middle as much as possible. I already have the tractor and food plot equipment at my place, but my friend has a skid loader, so that agreement may settle itself. What is a good way to write in buy out options in case one party wants out? He mentioned a 5% increase in value every year and I said fair market value at the time of the buy out. We still have to hammer out the details a little, but he's a good friend, and I trust his judgment on deer. I am a little worried if him and his son come out to hunt that I'll feel pressured to hunt my neighboring land to stay out of their way, even if I wanted to hunt the joint property.

Lots to think about. What else am I missing?

From a financial standpoint, these always seem fraught with pitfalls to me. Unless you have plenty of funds to throw around (and enlisting a partner suggests this isn’t the case), I think it’s always smart to consider: Whats the end game?

1) To own the whole chunk… Will the other party ever sell? If you can’t afford it now, can you afford to buy his piece in the future?

2) To stay partners forever… This gets really messy with descendants on either side. Does the partner agree with this?

3) To sell out to the partner later…

On the surface it feels a little financially shortsighted without these plans very specifically laid out and agreed upon.

 

[PatinPA]

From a financial standpoint, these always seem fraught with pitfalls to me. Unless you have plenty of funds to throw around (and enlisting a partner suggests this isn’t the case), I think it’s always smart to consider: Whats the end game?

1) To own the whole chunk… Will the other party ever sell? If you can’t afford it now, can you afford to buy his piece in the future?

2) To stay partners forever… This gets really messy with descendants on either side. Does the partner agree with this?

3) To sell out to the partner later…

On the surface it feels a little financially shortsighted without these plans very specifically laid out and agreed upon.

That's the tricky part in my opinion. We have a family hunting camp in Northern PA that my grandfather and 3 brothers bought in the 70's. It was great until descendants inherited shares, that wanted nothing to do with it other than to maximize the profit they could get by selling their share. Trying to sell them outside of the family to drive up the price. Just creates bad blood. Really amusing though when the seller then wants to buy back their share years later and gets told to piss off.

Even the best partner, what happens when you have the best stand location on your "side" of the property or you shoot a few nice buck in a row and they go empty handed. Do you feel pressure to share spot? Will they be ok with that especially if they were the initial financial investor? Big buck make a lot of people jealous and stupid.

 

[homerj]

I know myself well enough to know that I could never successfully share ownership of a deer hunting property with anybody else.

Good luck with your decision.

 

[jsasker007]

Sounds like how the Hatfields and McCoys started out. Friends or family should never be mixed with money in my opinion. I know it's NEVER worked for me. Now I know not to put myself in those types of situations. jmho

 

[Tree Spud]

He is a good friend, financially stable, has the same goals in mind for trophy deer management and doe management.

His wife could be a problem. There will be a timber sale on the property after (if) we purchase and he already mentioned not bringing it up to his wife so that we could use that money for trails and improvements without her complaints.

Due to the nature of the purchase, we are contemplating him buying the property outright (he has the financial resources) and me buying back half from him after the close. This would make the purchase less messy with the current owner. I'll admit this would be the easiest option but leaves me open for getting screwed.

The other issue is access. Bottom access from the road is tricky. My property is bottom access as well but my trail system and property design allow me to get to the top pretty clean. I have secured permission from the adjoining neighbor to access this potential property from his top on our adjoining line. This gives me the ability to access our "new" property in ways my partner couldn't, which could be problematic.

Keeping financial secrets from the wife ... that sounds dangerous

Him buying outright first and then selling to you changes things significantly as he will have the upper hand. Just my 2 cents ... I would have an operating agreement in place before the purchase of your half. Or, better yet, buy the property together with the partnership agmt in place. Hammering out the agreement will surface any red flags or issues saving you some headaches down the road.

 

[Dogshooter]

Why don’t you let him buy the whole thing with the understanding that if he wants to get out at some point you get a shot at it then?

Guessing it’ll be easier to keep your friendship going if there isn’t a partnership involved. And if he wants to get out down the road you would have a chance to buy from him then.

My brother and I purchased a property “together”. it was 160 acres for sale and we talked the seller into splitting it into two 80’s. It has been the best decision to keep them seperate.

 

[Catscratch]

A thing to consider that can get ugly is a divorce. No matter how sound your partnerships I think it's prudent to have something in writing just in case an ex decides they want half of everything.

 

[MadMadHoosier]

His wife could be a problem. There will be a timber sale on the property after (if) we purchase and he already mentioned not bringing it up to his wife so that we could use that money for trails and improvements without her complaints.

After digesting all the responses this might be the biggest indicator of whether you should do it or not. if he’s willing to mislead his wife, why should you have full trust in him?

 

[Howboutthemdawgs]

I guess I would just look at any land partnership that you know of or experiences you’ve heard of. I don’t personally know of any that worked. Maybe y’all can buck the trend? Does he need you to do it? Maybe he just buys it and you have a good buddy as a neighbor. Lord knows you don’t need another piece of ground to kill a big deer…you have that covered.