First you need to figure out what the price per acre is in your area for a plot around 40 acres. In my area 30-50 acres goes for around 10-18K an acre. Not sure what low and high land means, but is the low land a flood plain - that goes for much less than the low range in my area. Also if by high land you mean it has a view then in my area that is the 18K per acre here. You can probably get an idea from what is currently for sale what the range might be, but realize that only those sold count as comps.

Splitting it up is a good idea generally around here as the price per acre goes down with more acreage. Ie 50-100 acres sells at a lower price than the 30-50 acres and 100-200 less etc.

Now the problem you may have with splitting is that you can't close it until you pay off the mortgage on that part of the land so you'd either need to close on all parcels at the same time, that is have buyers for all 3 properties close at the same time or re-finance your property into 2-3 different loans with the property split, since you have 1 lien on all the property that needs to be released to transfer the title to a new owner. Your mortgage lender isn't likely to allow you to pay part of it and they release part of the property. It sounds like the low land may be less desirable and take longer to sell as well so that should be considered.

No idea if you'll be able to find a decent house for what you need in the area where you live. Depends on how much down you would have and what mortgage you would qualify for and what you consider decent and what area you'd want to be in.

Oh also a note on the cash part. The only good about somebody paying cash is that the property doesn't necessarily need to be appraised like it would for a land loan, but otherwise cash vs. loan shouldn't matter to you. Somebody with cash may also elect to make the purchase pending an appraisal in their contract and then there would be no difference.

Without knowing your area,. price per acre, and only your short description of the low vs. high is that either your estimate of 45K for the low is too high or the high land of 55K is too low.

40k for a 40 is pretty standard around here from what we've seen, we're in northern MN by the by. By lowland I just mean that there's a few areas on it that hold water, it's all just as wooded as the northern 40. The people wanting our northern 40 want it because they have a 40 acre parcel right next to it, so they're offering us more and willing to pay cash.

I guess we would shoot to close on all 3 at the same time? Refinancing would just be... well not sure how much exactly that would cost, but it would be money that we'd be giving up regardless. Trying to lose the least amount as possible! I feel like we could close on all 3. I know our main 40 with the house is extremely well known around here (everyone knew the previous owners) and we've already had 3 people interested in it; they just couldn't afford the whole 120 acres. If we split it up I'm betting we'd have even more interest. Hmm... so if we closed on all 3 parcels at the same time, paid off our mortgage and then some (so we could pocket enough to move), what other fees/taxes/closing costs could we expect?

Costs associated with selling in my area are:

Realtor fees - 6% is pretty standard in most areas - if you sell by owner none

Title insurance - may be negotiated to be paid by the buyer and is probably a local cost so can't help there

Title company and document fees - call a title company in your area, mine was a few hundred dollars

Property taxes - you pay the property tax up to the closing date for that year - the buyer pays the rest of the year

Other taxes - none in my area, but I know other areas have additional taxes.

Then you have the costs associated with buying a new place which you should already be familiar with from buying the one you now own as well as moving expenses.

Oh look at your old HUD settlement statement from when you bought the house and you can see what the seller paid as well. There should be a sellers column and a buyers column. This might give you ideas of the costs.

Oh thank you so very much! Our house and land has actually never been sold before, the previous owners owned the land since the 50s, so I'm not sure if that info would be there but I'll take a look!

@whitt whitt - you should have the HUD settlement in your closing documents from when you closed on the home. It will have a sellers column and a buyers column that shows all the things that each one is paying.

We owned a house on 7 acres (2 lots). They were jointly mortgaged. We sold the house but hung onto the extra lot to sell it separately. Because the proceeds from the home sale were sufficient to pay off the mortgage, the bank released its lien on the spare lot. A couple years later we were able to sell the spare lot, and it was just a cash/FSBO transaction.

Presumably, if you sold the house first, you could do the same. But it sounds like the only bird you have in hand right now is for the upper lot. It would likely be tougher to get the bank to release its lien on that property unless you agreed to pay down the mortgage by a certain amount. If your loan is through a local bank, you could probably have this discussion. If it's been sold on, then, well, not likely.

Closing costs, if you can avoid realtor fees are typically under $1000 for all the administrative stuff, plus whatever your pro-rated taxes are.

Ah, gotcha! Thank you! That would be the best thing to look at, thanks!

@weedyacres Gotcha! So for the bank, "release it's lien" - does that mean for them to accept the 55k as payment for that parcel and remove it from my mortgage? They probably wouldn't be willing to do that because they would... hmm, make less money long-term I'm assuming because my monthly payments would go down? Just a guess, I am extremely new to all of this! Also I do have my mortgage with a local bank, thankfully.

Please also keep in mind that if you sell your home before you’ve occupied it for 2 years, you’re also facing a capital gains tax. The two vacant parcels may be subjuct to capital gains regardless as they have no structures on them to qualify as your residence

Correct! I have read up on that and how much you get taxes vs how much you make off selling your property, definitely something to keep in mind! I didn't even know that existed until a few weeks ago. So for capital gains - the 55k cash that I could potentially 'receive'/would go to my mortgage, would put me in a different tax bracket for that year, I believe that's how it works.

Sort of. A capital gains tax is a tax on the profit you make. Based on your numbers above, you‘re hoping to sell the three parcels collectively for $300,000. Thats a $115,000 profit/gain on which you would be taxed at the capital gains rate, which is very likely to be higher than your regular income based taxable rate.

You should consult a tax accountant. Staying in the home for 2 years could make a significant difference in how much money you end up with after selling, paying off the existing mortgage and taking into account the potential federal tax consequences,

Question: Is this a house you’re hoping to flip or are you moving for other reasons?

I guess both? This house was intended to be a home we stay in forever (I think most houses are meant to be that!) but shortly after we moved in a man wanting to build a hunting dog training facility bought the 80 acres directly across the street from us and it has been non-stop with bulldozers, bobcats, cranes, excavation, etc. To our amazement almost everyone we've talked to about this isn't fazed despite it being a neighborhood, albeit country, dirt road. We still have interest in the house somehow.

We thought 120 acres would be enough to shield us from loud neighbors but we’ve learned it’s not about the amount of land you have, it’s about where your house is located on that land. So we’ve decided we’d be happy in the middle of a 40 acre parcel (although larger will always be preferred!) instead of 200ft from the road. So our new intent is house flipping if you will because we need money to move and we’ve made vast improvements because we intended for this to be our home forever.

Ok I asked because there are exceptions to the capital gains rule - but not caring for the neighbors, unfortunately, isnt one of them. Talk with an EXPERIENCED realtor who knows your market. Not someone who is a friend of a friend, or the person with the flashiest ads. Someone who can help you navigate this process, perhaps refer you to real estate attorney or tax professional who can answer your questions based on your unique circumstances and give you accurate advice.

Since you've done improvements you can increase your cost basis for the capital gains by the amount you've put into the house since purchasing it so the capital gains may not be as high.

@chisue So did some more research on capital gains and from what I can tell it would be more beneficial to wait another year to make it to the 2 year primary residence mark. We'd be married, filing jointly, lived there for 2 years, and making a gain of around 100k+ (we're hoping to sell everything to equal out to around 300k; so if we bought our house for 185k and sold everything for a total of 300k, esp with splitting the parcels, we'd have what I'm thinking would be a 100k gain, probably less though).

The training facility is directly across the street from us, we're just 200 ft from the road. From what we heard from the owner when he first moved in, the actual training is going to take place on the other end of the 80 acres. They won't have 'buidlings' or anything, just an open 80 acre field where they let birds go, shoot, and then train dogs to bring them back. He even put in a lake so they can practice on the water... dude has too much money. It is extremely annoying, non-stop beeping, bobcats, increased traffic etc. Our quality of life out in the "country" has greatly decreased and honestly it sounds like we never left the city.

But no-one seems to care, so, we're hoping it doesn't effect our home value too much. But on capital gains, from what I could tell - you do have to live there for 2 years before you're not taxed, correct? Even if the profit you make would be well below the 500k gain (married, filing jointly) mark? Thanks for the help!

The suggestion to get a very experienced realtor who is experienced in undeveloped large parcels is a good one. They can put you in contact with the professionals that you need to assess your options.

It is probable that splitting the master parcel of 120 acres into three parcels of approximately 40 acres each will unlock hidden value. I would want to explore this option.

One potential way to do this is explore is refinancing the property and simultaneously splitting off the saleable parcels as part of the refinancing. Essentially you pay off the original mortgage and obtain a new mortgage for the forty improved acres. The other two parcels would be free and clear with their own tax numbers. Once they are free and clear you can sell them as you desire.

You could have done this when you financed the purchase the first time. You didn't do this. With the run up in prices, your forty improved acres is where most of the value lies.

An attorney who deals in real estate can explain to you how to create the three parcels with three different tax numbers.

It's an odd thing, but your 40 improved acres and two unimproved 40 acre parcels are worth more than the 120 total acres. It's easier for someone to purchase 40 acres than it is 120 acres. As the size of the parcel goes down the price per acre goes up.

The USDA writes loans for rural land. Find a good, experience farm and land realtor and get a consultation with a real estate attorney. Tell them that you want to subdivide the parcel and refinance. They will help you to figure out how. You may even be advised to subdivide the third parcel into 20 acre parcels for sale. Only a local land and farms agent will be able to tell you the best combination.

You next door neighbor will be finishing up construction in the next few months. As annoying as it is right now, it will come to an end. You have rural land. Without zoning, you are at the mercy of whoever is close by and whatever they want to do with their land. There is an upside to rural land and a down side. I'd be patient and reassess once he finishes his project.

I'm not sure what your bank would be willing to do. You may have to do a complete refi, as homechef described. Or they might let you pay down the mortgage by $X but keep the same payments. You'd need to talk with them.

you really, really need to talk to an experienced tax pro about the sale. The exclusion referenced earlier only applies to the primary residence and the land it is on. It does not apply to the two lots and may not apply to some of the lot where the house is. It depends on “facts and circumstances“ which aren’t in the OP. Do some research on the Section 121 exclusion,