All Forum Posts by: Davido Davido

Elements of Abandonment

Two things must occur for property to be abandoned: (1) an act by the owner that clearly shows that he or she has given up rights to the property; and (2) an intention that demonstrates that the owner has knowingly relinquished control over it.

Some clear action must be taken to indicate that the owner no longer wants his or her property. Any act is sufficient as long as the property is left free and open to anyone who comes along to claim it. Inaction—that is, failure to do something with the property or nonuse of it—is not enough to demonstrate that the owner has relinquished rights to the property, even if such nonuse has gone on for a number of years. A farmer's failure to cultivate his or her land or a quarry owner's failure to take stone from his or her quarry, for example, does not mean that either person has abandoned interest in the property.

A person's intention to abandon his or her property may be established by express language to that effect or it may be implied from the circumstances surrounding the owner's treatment of the property, such as leaving it unguarded in a place easily accessible to the public. The passage of time, although not an element of abandonment, may illustrate a person's intention to abandon his or her property.

@Wayne Brooks -More to the point, "Abandoned" does in fact mean "available to anyone who wants it".  Society actually encourages the productive use of assets.  Usually however, it is government that believes it should have first right to them.

Hello Wayne,

Thanks for your response.  And I certainly agree that paying taxes on another's property does not define it as abandoned.  I suppose it depends on how you define "Abandoned".  The way I use it in my post here is that neither the legal owner, nor anyone designated by the legal owner, wants the property.  They are not using or planning to use the property in any way.  Hence, the owner has "abandoned" it.  Frankly, quite often the legal owner's intent toward the property can only be inferred.  Still, for those properties on which there is open entry (no breaking and entering) and upon which I can document a record of apparent abandonment, there is no law that prohibits occupancy by a member of the public.

Hello friends in the BP community.Can you help me to develop this plan for investing in abandoned Washington State real estate with emphasis high on ethics and to maximize my business privacy while minimizing my entanglements with government regulation and taxes.This plan should create reliable income under

http://www.forbes.com/2011/03/23/abandoned-mansions-luxury-real-estate-forbeslife_slide_2.html

Owners of abandoned property, who can be found, would be offered a token cash payment for quit claiming property that they have already abandoned or intend to abandon. Alternatively, a lien holder’s interest would be purchased for a small fraction of what is owed.Once acquired, the lien can either be held to secure my investment against a junior lien holder and/or the owner of record, or the lien can be foreclosed to force a trustee or sheriff’s sale of the property with the goal of collecting a fuller value of the lien from the sale, as note buyers frequently do.

In the event that the owner of abandoned property cannot be found my company would assume control of the property, pay the taxes as necessary to avoid property tax foreclosure, and manage the properties for the income they can produce.If a previously lost/unfound owner eventually shows up, then we’ve done him/her the services of saving their property from tax foreclosure, of preserving the property from waste and theft, and of managing the property in their absence. A previously absent owner is of course entitled to their property and all rents received.My company, on the other hand, would be entitled to be repaid for all property taxes paid and for the normal costs of collecting rents (in effect a management fee). Absent owners are NOT required to pay for unnecessary improvements made on the property in their absence.

If lien holder on the abandoned property fail to enforce their liens within the 6 year statute of limitations, and if the absent owner does not show up within the 7 year period of adverse possession, my company could either simply continue to quietly collect rent without taking ownership or could quiet the title and sell the property.Eventual acquisition of clear title and sale of the property should not be necessary to make this plan succeed.My idea is that sufficient income would be achieved through managing the various abandoned properties for rents and resources.

My company would be serving the community by providing needed low cost housing alternatives –often the opportunity to place or rent an RV on the vacant lots, we’d also provide rentals that tenants can pay for by using their own labor to improve the existing housing.Jobs would be created.And, I believe, the general community will be served by our company maintaining and improving a number of properties which would otherwise become waste.

Governmental interaction would be avoided by indefinitely collecting rents on property abandoned by others or at least by not owning the properties until the very end.I would keep the visible business footprint as small as possible.Doubtless this plan involves more work than simpler forms of real estate investing.And working abandoned real estate will require creativity to improve and/or capitalize these properties which are considered undesirable even to their owners.I am attracted to working with abandoned real estate because it provides tremendous privacy.My company can control and collect rent on multiple properties where there is no public record of our interest.

Abandoned real estate can usually be identified by reviewing a county’s list of delinquent property tax parcels for parcels nobody has paid the taxes on for at least 2 years and then further analyzing those properties.In the abandoned real estate arena the typical property is abandoned because it is of little or no value –as in too small, or odd shaped, or wet, or steep or otherwise unsuitable to build upon.Income can still be derived from a significant number of such properties by renting them for RV use, cutting and selling trees, creating gardens, renting pasture, harvesting crops, creating storage capacity, or by (ad your idea). A small percentage of abandoned parcels can be sold at profit to adjoining property owners or other investors.

Though small unbuildable lots are the typical abandoned property, there are also occasional abandoned single and multifamily residences –usually in a state of significant disrepair and neglect, usually because the owner(s) has been hospitalized, committed, imprisoned or simply mysteriously disappeared.At times timber and farm properties or even a mansion are abandoned.

Another reason valuable property is abandoned is often that the parcel is loaded with debt owed to multiple lien holders and/or has assorted problems too difficult for the owner or any lien holder to want to take on.To profit from these properties will require becoming an expert problem solver. However, for an experienced investor other people’s problems can become the investor’s opportunity.For example very often lienholder debt can be handled with the mere passage of time. Washington has a six year statute of limitations for enforcing unpaid debt. Liens on abandoned property frequently remain uncollected.By the time a property is abandoned, liens are often already close to the age at which they become unenforceable.

This is a labor intensive plan.I believe it will work in the current economic environment, but it is even better suited to a (coming?) economic environment where labor will be more available than money.Capital costs for property acquisition are very low –typically less than 10% of assessed value. An owner who can be found and is willing to formally abandon his property via a quit claim deed, the owner would be paid no more than 5 to 10% of the assessed value. The same 5 to 10% would sometimes be paid to a lien holder whose interest could be needed to secure our investment.It is surprising how often mortgage holders consider it cheaper to write off significant unpaid loans rather than taking the steps necessary to foreclose, and to pay up past due taxes and to deal with problems from wells, to septic, to access, to waste. Property taxes would be paid only as necessary to not become three years delinquent so as to avoid property tax foreclosure. (The typical annual tax is less than 1. % of assessed value).

What problems does the Bigger Pockets community see with this plan?Your wisdom and insight is valued and appreciated –even if not immediately followed.

@Mitch Stephen.  Thank you for a wonderfully thought provoking post.  Inspires me to consider new possibilities.

@BillGulley.   Bill thank you for your down to earth comments.  Inspires me toward balanced reasoning.

Bless you both