Subdividing land/acres....

[Adrian G.]

I was wondering if anyone knew of any problems with subdividing/selling a large piece of land with undivided fractional interest....Anything issues come to mind?

[Bill Gulley]

Hi, after you define undivided fractional interest, I'll probably give you at least a half dozen things to overcome. Bill

[Adrian G.]

Undivided fractional interest is when "A buyer" acquires an ownership right to use and possess the property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property.

[Bill Gulley]

Ok, Tenants in common as an undivided interest. So you're speaking of the proposed buyers buying an undivided interest, such as one half, one quarter, one one hundredth, etc.

How are going to set it up so that each interest is marketable, in your co-op?

How will it be insured? Do they all execute the financing docs? What's the security interest? Are you in a community property state? What's the maintenance arrangement for common areas or owned parcels? If you are subdividing parcels, will the others have easements? Any road agreements? Will you have a community well, what about water rights? Who will adminsiterthe property for all of the owners.....ok, that's enough...
are there problems? You bet there can be. Tell us what you have in mind here. Bill

[Adrian G.]

Bill,
I am just gonna answer your questions as I read them so please bare with me haha.

Yes tenants in common with the interest not disclosed at this time (not sure yet).

I dont know if its insurable, at least not to my knowledge since its not buildable. ( I did ask a few different places and they said I could not insure non-buildable land covered with trees but I will check again).

No financing, it will be all cash buyers, There is no road frontage so Im not sure if there are agreements and I would need to find out about other easements to the property (Im sure there is one). There will be no community well or exclusive water rights since everything is undivided ownership.

Basically its all forest land with a small water frontage and its not build-able so I was thinking about breaking it up and selling it as "pieces". (Which the county allows).

[Bill Gulley]

The part that scares me is saying that it's not disclosed to the buyers.

No one on this site is going to know where the land is located, so what's the deal....what do you want to put together?

Sell off timber, hunting/recreational area, what?

How you put it together might also come under SEC regs for investors.

What's the plan? B

[Adrian G.]

Bill,
It will be disclosed to buyers and be sold as regular real estate and deeded as fractional interest ownership. (I came up with this after I purchased the same thing from the state).SEC was not involved haha. Im not trying to market it here on the site but as of now its only an idea.

[Bill Gulley]

Well, if you can't explain the idea here, you can message me if you want. The thing about real estate, nothing is new, it's all basically been done before, someplace and sometime. Can't help unless we know where you're going.

For example, all land is insurable, you won't have many buyers assuming liability on a property, so you'll at least need a liability policy, the type may well be covered depending on what the land is to be used for. All land has a use and if privately owned will be somewhat regulated and taxed.
You're not going to have multi[ple owners without some type of an agreement, even if it's just a tree hugger group that will let the property sit there for future generations! B

[Adrian G.]

Bill,
I thought I was saying it haha,I just want to break up the land to smaller pieces and sell it as undivided fractional interest (with no owner having exclusive rights, which is allowed). I will look into the liability policy, This land is basically forest land, its deep in the woods and not buildable and has no road frontage so there is not much use even though there is a "use".

[Brian Levredge]

I have a TIC partnership on a bunch of SFD's I/we own, but this sounds a lot different. My properties are defined by both parcel and address, which obviously isn't the case in your situation, save for the parcel as a whole. I would think you would need to have some type of CC&R docs drawn up if you are looking to actually subdivide the parcel itself and sell off pieces while at the same time not grant exclusivity for those pieces.

I would think it would be easier to put the property into an LLC or trust and grant different shareholders complete access that way.

[Just Don]

ANY subdivision has to be approved by county government and their rules and regs. Getting that passed by those that govern it wont be easy. Check with your zoning guy. Here there are min lot sizes and whole host of water sewer requirements ,,even tho you say it is unbuildable,,somebody will TRY to down the road.

Here fractional interest gets hairy when grandpa and grandma's farm gets handed down to the 3rd or 4th generation without selling it. A nightmare complying with government farming regs. Plus generally no real Chief,,,all drones,,,all scattered across the globe and know zip about the farm other than they get a check.

IF you are 'creating' fractional interest of unrelated parties,,to be avoided unless YOU want to be a full time argument settlement biz. find a NEW way!!!!

[Andrew Carlson]

How can you have an undivided interest when by subdividing you are creating a divided interest?

Every party gets to own a portion of each lot?
That's dumb.

[Adrian G.]

Actually I was gonna correct myself and someone else, u cant have a subdivided fractional interest....Thats what I get for typing this from my phone.

No each party gets an undivided fractional interest in this property and will acquire an ownership right to use and possess the property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property. Its actually quite common in certain states (Kentucky, michigan, alabama, etc)

[Account Closed]

Fractional ownership is fairly common in my area. There are 2 different types.

1 way is that several owners share ownership of a house or condo and each owner has assigned weeks to use the property.

The other way would be a large parcel, usually a ranch or farm, that is owned by a large group of people and they each have a small building lot assigned to them, and then they each have full use of the large common areas.

There are a couple of different campgrounds that are owned that way. No one has a divided parcel; everyone co-owns the whole thing, but each owner has a campsite assigned to them for their own personal use.

[Adrian G.]

Originally posted by P NW:
Fractional ownership is fairly common in my area. There are 2 different types.

1 way is that several owners share ownership of a house or condo and each owner has assigned weeks to use the property.

The other way would be a large parcel, usually a ranch or farm, that is owned by a large group of people and they each have a small building lot assigned to them, and then they each have full use of the large common areas.

There are a couple of different campgrounds that are owned that way. No one has a divided parcel; everyone co-owns the whole thing, but each owner has a campsite assigned to them for their own personal use.

P NW, Im glad you know what Im talking about I feel like people think Im making this up hahaha. The undivided fractional ownership I own is pretty similar to "campground" way you were saying ....No one has a divided parcel, everyone co-owns the whole thing...but with NO campsite haha.

[John C.]

I follow what you are talking about, I've looked into myself for a larger property I own. The county wasn't too interested to hear about my plans and let me know they'd file suit against me if I proceeded. They then told me I couldn't camp on my land either but balked when I asked for that in writing. (basically selling off so many undivided interests is construed as by-passing subdivision laws)

But it does happen on a smaller scale, I own a 1/6 undivided interest in patented 30 acre silver mine in CA. How did that one get divied up? Probably no one asked permission and just did it.

After speaking with others the best avenue was given to form a LLC and sell member interests to the land which came with associated rights to camp in designated spots. I've let it rest for the moment, only so much time and so many projects.

[Adrian G.]

Thanks John, yeah every county handles it differently so Im glad I got some in a county that didnt care or wont make a big stink about it.

[John C.]

I hear that. How many acres is your parcel? A couple other things the county didn't really like was that if you have a de facto "campground" but aren't offering any ammenities how are the impacts of people all over going to be taken care of: ei, fresh water, bathrooms, trash, or even further out -- law enforcement issues.

[Adrian G.]

These are the parcels I have available:

1. 10 acres.
2. 5 acres.
3. 4.59 acres

Im just looking to break them up and move on to other deals.

[John C.]

Hi Adrian, please keep us posted on your progress if any. Thanks! -John.

[Bill Gulley]

John, did they ever give that to you in writing? Didn't think so. The easiest way, IMO, is to put the property in a LLC and then do all the division in the operating agreement. You can have 5, 25, 150 members in the LLC. Never heard of any government entity telling a property owner they can't be on the property or at what time of day they could use it! I see the point with zoning, building and subdivision requirements, but multiple owners makes not a subdivision. If your goal is to have a club house or cabin, I'd do that under the LLC. Long ago, I was in a hunting club in La. along the Sabine RIver that we did in a trust (didn't have LLCs in the old days, lol) Good luck, Bill

[Adrian G.]

Originally posted by John Connolly:
Hi Adrian, please keep us posted on your progress if any. Thanks! -John.

John,
Everything has been going great, I have been selling lots for a pretty decent profit. I paid an attorney out here to draft up a deed for me (which I could have gotten online but better safe then sorry) and the county has been kind enough to even help me through the process. They consider every owner of interest as a separate owner and have and will be billing them for the real estate taxes separately. (I had one county send me a bill for the whole lot and made me collect from all 30 owners (that was not fun) but very soon we will be going through LLC's for this to then again "play it safe". Im gonna make a new thread somewhere on here about my experience and example profits and stories of how I got it done.

[John C.]

Awesome! You guys are motiviating me to get started again on a project I thought wasn't workable.

Let us know on the land forum when you post it up Adrian, I'd be very interested in all the details.

[Adrian G.]

Hey Everyone,
I posted a thread here in the land forums about how I put these deals together.

Let me know what you think and feel free to message me questions..

http://www.biggerpockets.com/forums/34/topics/50999-how-i-made-1k-5k-a-month-dividing-land-