Your opinion on half acre 'Purchase' near Palestine, TX

HoustonDave · December 18, 2010, 12:45:29 AM

Hi all, this is my first post here.

I'm looking at about a half acre lot on a small private lake to build a getaway cabin. Here's the view from the lot:

The lot is bordered by ~100' of lake on the north, ~100' paved private road on the south and the sides are a little over 200'. It is gorgeous, with 12"+ white oak post oak and small dogwood. The lot is cleared of underbrush.

The lay of the lot is such that it drops about 50' over the 200' length. The first 50' from the road is relatively level, then it drops about 20' at about 45 degrees, then slopes gradually down to the water line.

The only restrictions on the land are no mobile homes, they want metal roofs, and there are septic system requirements.

This place is gorgeous, hilly land about 30 minutes from a medium sized town. The lake has good fishing, a man-made swim area, paved road, electrical and water available at the road, and minimal restrictions on building a boat or fishing dock. They are asking $20k for it, which is not bad compared to the prices I'm seeing for lakefront property in East Texas with good drainage. Lots on larger lakes like Lake Livingston are selling for twice that on what is essentially mud flat.

Here's where it gets a little squirrelly about the 'purchase'. You don't own the lot individually. Instead, the people who have bought-in collectively own the fishing club which then owns the land collectively. What you get when you buy is essentially a stock certificate representing the particular lot you "bought". The club pays the base property taxes, and you pay the taxes on any improvements on your lot. Reading the rules of the club, there are two situations that could cause a concern.

If you lose your club membership, you are required to sell for a negotiated price. There is a mediation clause there. It looks like as long as you pay the annual dues ($500 per year, which covers your portion of the land taxes, the paved private road, and general maintenance) and don't do anything stupid (like, say, driving a car through your neighbor's house) you don't have any risk of losing membership rights.

If the club dissolves, there is a clause that the assets of the club will be divided among its members. Specifically, title to "your" lot will be deeded over to you.

That's the first area of concern. The second regards lot boundaries. According to the current owner of the lot, the club, and a local surveyor, there has never been a proper survey of the area and doing one would run into the thousands. The club set out markers delineating lot boundaries when they made the lake in the 60s, and has successfully resolved any member disputes over boundaries.

While it doesn't seem even a remote possibility, the issue is what happens to those lot boundaries if the club dissolves. I can't imagine it doing so, considering it would make it impossible to fund maintenance of the lake and facilities, but it's something to think about. Suddenly those un-surveyed property lines turn from a "shrug" to a "OMG now what?".

Yes, I'm going to have an attorney look at the sale terms, but I'm curious what folks here think. I'm guessing that most folks here would much rather prefer a less "strings attached" land purchase, but frankly I think doing that while still getting usable lakefront property within 3 hours from Houston would be way out of our price range.

Assuming the sale goes through, I'll be back asking about construction and placement of a starter 16x16 small cabin.

Thanks all!

-David

IronPatriotTN · December 18, 2010, 12:52:53 AM

..."there has never been a proper survey of the area and doing one would run into the thousands"...

Major red flag.

How often are you actually going to use the lake? Personally I would rather have a few acres without any "restrictions" or grey areas and use a public boat dock for water fun. But that's just me.

December 18, 2010, 01:07:04 AM

Thanks IronPatriot,

I get what you are saying on location. I grew up in rocky hills and bluffs in northern Arkansas. There's just something about slope and water for me. Problem is all the land around Houston is pretty swampy. You have to drive a good couple of hours to get what I would call hills. I looked at land near local lakes, and it all just feels like river bottoms to me. Wife and I have done two drives up to that lake as day trips. We are confident we could do that at least once a month for short trips. And I work from home, so with the right building we could stay weeks at a time so I could work while the kids worked on skinned knees and mud in their hair.

That survey thing is a red flag for me too. The total property (several hundred acres) has been surveyed for its boundaries, just not the individual lots. I'm trying to go through scenarios and consider how I can head off risks.

IronPatriotTN · December 18, 2010, 04:45:51 AM

I would certainly find a good real estate attorney to look over every detail in the contract. Time share and community property such as that sounds, can be very very tricky. You don't want to build a $50-100k house to find out you have to move it.

bayview · December 18, 2010, 07:35:07 AM

Now you see why the price of the lot is less expensive than others in the area . . .

I personally wouldn't get involved with a "club membership" without actually owning the property. The club members will be able to tell you what to do during the entire building process. If a neighbor doesn't like ______________ (the color of your home, the size, where it is placed on the property, infringing on their view, the color of car you drive, what toothpaste you use, etc. etc.), you will be in trouble. There is always a neighbor that takes it upon themselves to keep an eye on you. Will always have "helpful" comments, etc. You will not be able to get away from this. In your situation they will always win . . .

Your "property" would be near impossible to resell without the lot being surveyed. Sooner or later the "club" will dissolve. Expect to pay $$$ to get that settled. ($40-$50,000) You may find that your "lot" may not be yours.

I know the excitement! It's a beautiful lot! You can't wait to get started. But, I would find a different lot that is surveyed and in your name.

/.

December 18, 2010, 07:42:48 AM

To a certain extent, the free market system (whether stock, real estate or beanie babies) tends to establish pricing to value. This property is probably priced correctly considering what some would feel are some drawbacks compared to other properties. Obviously, these drawbacks have not prevented others from purchasing and building, and perhaps, you too, after consideration will feel that the rewards justify the risk.
Your greatest risk here will be perpetual reduced market value on what you build, or a lack of equity build-up compared to another location. But, in the new America, this may be a situation that everyone faces. If your intention is to use what you build for the remainder of your life and then pass it on to your children, you can probably live with the drawbacks, build and you and your family can enjoy many fine years.
I too am involved in a similar situation, a 150 year old Railroad gravel pit owned by 15 members. Originally just campers and shanty's, now after 35 years, evolving to cabins and cottages. Market value of structures on the commonly owned land will never be what that same structure would be on it's own land, but, comparable properties (lake front) are virtually non-existent. While my cabin is certainly among the best ever built, my sweat equity has controlled my costs enormously compared to those who hired a contractor. Between auctions and DIY, I am very comfortable with the amount of my investment, and, I never intend to sell, but rather will pass it on to my children. It is not an investment in dollars, but rather an investment in recreation and family times together and in that perspective, I expect my return on investment to be handsome indeed.
Ten years ago, when recreational properties were rocketing upward in value, this property could have been a poor performer.
Look at it this way, the lower cost of this lot may reduce your total real estate investment, and that, may not be a bad thing.

Ndrmyr · December 18, 2010, 07:57:14 AM

I think Bayview's points are well taken, and no one can predict the future. While a dissolution of the organization would be painful and perhaps costly, the ill effects would certainly be moderated by the fact that the majority would be well-served for either a) the membership organization to continue, or b) for a cost-effective reorganization. I suspect the expense of a total survey and reorganization when divided among the members would a sustainable expense, if....it ever happened at all. The good news, is, that expense would almost certainly create an immediate increase in market value, since the value limiting features of the property no longer exist.
If you can afford an equally desirable property, you will certainly have less risk and enjoy greater appreciation on your real estate. If affordability is an issue, this may be a way to acheive your goals with less money or no debt, then I think it is worthy of consideration. Obviously, others have forged ahead.
In the case of a total economic melt-down, one would be better off on their individually owned land, since financial distress would almost certainly threaten the viability of the organization. Food for thought.

HoustonDave · December 18, 2010, 10:20:05 AM

Thanks both of you. Great insight.

MountainDon · December 18, 2010, 11:29:55 AM

Many of the potential issues are going to depend on how the "thing" is set up. NM_Shooters land is set up as a corporation. He owns a share and has rights of use. All the details of who, what, where, why and how are spelled out in the corporations bylaws and regulations. One major difference between his situation and this one is the size of the plots that members are "given" to use. Here we're talking half acre and Shooter has something like 15-20 acres, maybe more. So the precise boundaries don't matter as much.

December 19, 2010, 12:15:45 PM

Thanks Don.

It's a pros and cons kind of thing.

The only explicit restrictions on construction are:

#1 no mobile homes can be moved onto the property. No RVs or campers can be left permanently.
#2 they want metal roofs
#3 you have to have a permitted septic system (standard is ok if the soil will allow, otherwise aerobic)

On the flip side, there are no other permits required by the county, and there are no explicit restrictions on boat docks/piers or size of structure.

The downside of this is that all construction must be approved by the board before starting. They have no problem with people building their own, but they don't want garbage either. This does mean that it will be subjective what kind of construction meets with their approval. Other than the restrictions above, there are no clear guidelines.

And the upside of this is, from what I've seen, they have enforced that to keep the lots reasonably clean, but without being crazy about it. Looking at the existing buildings, people have done a variety of things with their lots from small DIY cabins to what equates to a luxury vacation home owned by a local judge.

Obviously there's a trade-off here. I also looked at Ivanhoe community near Woodville, TX. This is a true ownership area where there are deed restrictions but the individuals own the property. There isn't really much true lakefront available (mostly swampy inlets), and the land is a bit less hilly, and the prices are higher. But the kicker is that because it was individual ownership of lots, it was next to impossible to have any say in what people did with the property. Some folks parked old trailers or RVs on it and then just let it grow up around them. I saw an RV with a tree growing through it and lots that looked like a salvage yard two lots away from someone's 2500 square foot vacation house. The variation was mind boggling.

Back to the lot I'm looking at near Palestine, considering the size of the lots and how close the buildings are going to be to each other, I'm comfortable with more restrictions rather than less. As you say, it would be different if I was buying a 5-25 acre plot of land. Then it would be my business and nevermind what anyone else thinks about what I do with it.

Based on comments from existing owners out there and from the club directors, the purpose of the preapproval is to reduce the risk down the road of encroachment and to make sure the construction doesn't end up messing with your neighbor's enjoyment of their property (eyesore effect). But the risk is there that I'll get my plans rejected the first round. I'm going to make a point of discussing them with my potential neighbors before I sign on the dotted line. If my neighbors sign off on it, it decreases the likelihood the club directors will reject it.

Really, that stuff concerns me less than the property rights should the club dissolve. But as Ndrmyr pointed out, there are good reasons for the owners as a group to not let that become an issue.

bayview · December 19, 2010, 02:46:49 PM

After viewing your responses, I think your mind is about made up! I think you are going to "go" for it!

Personally I wouldn't want an oversight committee keeping an eye on everything that I did . . . Obviously, some people don't mind this intrusion. Home owners associations, gated communities, etc. . .

I wonder why nobody does anything at the Ivanhoe properties if there are deed restrictions . . . The neighborhood should get together and make the owners of these trashed lots clean them up.

More than likely with a ½ acre, you will need an aerobic septic.

In my opinion, I would spend more $$$ up front and get a deeded lot in a nice subdivision. I think you are limiting resale when there are no obvious property lines.

/.

HoustonDave · December 20, 2010, 12:41:17 AM

I'm debating now whether to admit I'm part of the "dark side". I live in a small subdivision in Houston and I've been on the HOA board for over 9 years.

That may have something to do with my tolerance level for rules, eh? I'm not rabid about finding violations, but I have seen the other extreme too. These are "garden homes" where there is only 3' between houses and the back yards are tiny. Just recently, one homeowner notified us that their neighbor was not setting trash out for collection but was instead "storing" it in their back yard among the 3' tall weeds. (Why in the hell would someone do that?)

I can give you a probable scenario on why Ivanhoe has not enforced deed restrictions effectively. My HOA has found itself there too. Both Ivanhoe and my association are in unincorporated county areas.

Let's say someone does something like, say, neglect to mow their back yard for 6 months. We can't touch it unless a neighbor complains and can see it from their property. Then we can send a letter. If they ignore that, then 30 days later we send another letter. If they ignore that, then we notify them they have 30 days to fix it, or we will 'force mow' it.

Fine, but that means we have to pay someone to do that and then bill the homeowner. And we can't force them to pay. The best we can do if they don't pay it is add it to their annual dues. And if they don't pay it still, then all we can do is put a lien on the house for a measly $50 plus attorney fees, etc. And we'll only see that if they sell and the buyer pays it off.

In other words, if a community doesn't have a lot of free cash, it's not feasible to force anyone to do anything because you are spending money you probably won't get back for months or years. It's no fun being on an HOA board..unless you are the stereotypical busybody who just enjoys poking into other people's business. Me, I took the job because no one else wanted it.

Regarding aerobic, I suspect you are right.

Regarding spending more up front...I spent three weeks combing the net on lakefront property. All the lakefront in Southeast Texas is either fully developed (and therefore out of my range) or swampy. Lake Conroe undeveloped waterfront starts at $80,000. Lake Livingston starts at $60,000 for a cove lot. Now if I was in North Texas...Lake of the Pines has some good waterfront. But it's close to 4 hours away.

Someone suggested getting lakeview or just near the lake and heading for the lake when you want waterfun. I may need to take another look at that, or have another look at Ivanhoe. Doesn't look like I have many other options within 3 hour drive. That's what I get for living in a coastal plain I guess.

bayview · December 20, 2010, 08:09:42 AM

It seems to me that you are an excellent candidate for the board at the club where you desire to purchase the property!

Keep us updated . . . I am interested in your floor plans and the construction process.

Is there a minimum on sq. ft.? I would be interested on how you will take advantage of the sloping lot . . .

/.

Ndrmyr · December 20, 2010, 08:27:49 AM

In my similar situation, we are organized as a not-for-profit corporation, and I did serve for 5 years as the president which does get you intimate knowledge of the organization, and a certain amount of status and respect going forward, which allows one to better protect their own interests in the future. With our limited owners (15) nearly everyone that sees it wants to buy, so values are pretty stable just because of demand.
Once you've built, I wouldn't be afraid to get involved in the leadership.

December 20, 2010, 12:30:27 PM

Thanks Bayview. I asked and there is no minimum on SF. My wife and I have been sketching out a 16x16 cabin, 1.5 stories. I've also ordered some of the plans here to flesh out the design. I'll keep you guys posted!

Ndrmyr, this one is incorporated too. I won't be shy about volunteering, lol. I think there are 75 owners at Ioni. Contrast that to Ivanhoe which has about 3000 owners. Argh.