My wife inherited a piece of commercial property....

[Chance Cooper]

Recently my wifes parents went ahead and split up their inheritance and my wife received her share of the inheritance, they wanted to do it before they died cause they would rather see her benefit while alive...Anyway, Its a piece of commercial property that is paid for completely right downtown. Her and I both are into the rental houses, this is what we want to do. I have not had the commercial property appraised yet, but did receive a cash offer on the land for $50k, the guy owns an insurance building next door to it.

My question is, is there a way to benefit by keeping the property? Ive thought about putting a building on it etc. but now your talking about loans in the 200k-300k. I dont want that much invested. Ive thought about refinancing the land and taking that money and buying more houses however, I believe that commercial land rates go up after a few years, their not fixed rates.

Other than having the land appraised and then saling it, is there anything else I can do to exhaust this property and get the max out of it? Also lets say it appraises for 100k, does that mean I shouldnt take a penny less than what it appraises for? As of now the taxes are $1500 a year and were not making ANY money on it. This will be the second year that we have paid taxes on land that is just sitting there not making us money...Im not cool with that.

Any ideas would be great.

[Jon Holdman]

First, have you discussed this situation with your CPA?  Them giving it to you while they're alive, and in one big lump at a time, has tax consequences for both of you.  For you, it means (I think, not a CPA) your basis is their basis.  So, the gains when you sell are higher than if you inherited at death.  At the very least you need to figure out what their basis was when they gave it to you because you will eventually need that number.  For them, that probably exceeds the yearly gift limit.

You should get as much for it as you can.  That may or may not have a relationship with an appraisal.  An appraisal is really just an estimate by one person based on the facts at one point in time.  Land is especially difficult to put a value on, unless you have a really good basis for comparison.  What's going on in your area?  Have similar parcels in the same area sold recently?  Any construction going on?  Is there demand for new buildings of the sort you or someone might build there?  Even if an appraiser comes up with $100K for the value, if the only buyer is the guy next door with $50K cash, that might be worth taking.

If there are any lots for sale, call the listing agent on those and discuss your lot.  If there is any construction in your area, track down the builder or owner and talk with them.