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Minnesota, the “Land of 10,000 Lakes,” is known for its natural beauty and abundance of lakes, forests, and scenic landscapes across the state. If you have recently inherited vacant land or property in Minnesota, you may be wondering what to do next. With proper planning and decision-making, inherited land can become a valuable asset. This guide covers key steps to take after inheriting land in Minnesota.
Understanding Your New Land Asset in Minnesota
Before deciding what to do with inherited property, you first need to understand the land itself. As a Minnesota landowner, here are some important things to research about your new real estate:
- Location – What county and city is the land located in? Familiarize yourself with the area.
- Size – How many acres or square feet is the land plot?
- Zoning laws – What can legally be built or developed on the land based on state and local zoning restrictions?
- Terrain – Is it flat, hilly, rocky? Are there forests, fields or marshlands?
- Access – Is there road access or just lake/river access?
- Improvements – Does the land have any existing structures or buildings?
- Taxes – What are the current annual property taxes on the land?
- Comps – What are comparable land plots selling for in the area?
Spending time to understand these key attributes will help you strategize better regarding what to do with the inherited Minnesota property.
Paying Off Liens, Loans, Taxes on Inherited Land
Before tackling new plans for the inherited real estate, you first need to handle any legal or financial obligations tied to it.
Some aspects to resolve include:
Mortgages or Loans
If there are outstanding mortgages or loans tied to the land from the previous owner, these debts will still encumber the property under your ownership. Try to pay off these land loans as fast possible.
Otherwise, interest costs will accumulate quickly. Consider taking out a separate loan to pay off the land if needed. Having unencumbered land free of loans will open up more options later.
If there are mechanic’s liens due to unpaid construction work or other types of liens, settle these with lienholders. Try negotiating with them first to reduce payoff amounts before paying what they claim is owed. Get lien releases after paying them off.
Make sure inheritance, income or estate taxes tied to obtaining the land have been paid correctly. Consult with tax experts as needed to avoid future tax headaches. Stay on top of land property taxes annually as well. Consider setting up an escrow account to automate tax payments.
Handling these payoff obligations early makes managing what to do with inherited land much easier.
Holding the Land as a Long-Term Real Estate Asset
If you have the financial means to hold onto inherited land in Minnesota for a while, it can become a valuable real estate asset. Appreciation over the long run can be significant. Here are some tips:
If the land has waterfront access only, consider creating road access. Purchase an easement from adjacent properties or build a driveway. Road access exponentially increases land value by opening up development potential.
Modify Zoning Rules
Research options for getting the land re-zoned to allow for more valuable property types in the area. See if commercial, industrial, residential or recreational zoning better suits the property based on location and demand.
Add Utility Service
Contact local utilities to run electricity, natural gas, sewer and water services to make property shovel-ready for future builds. This requires permits + installation fees but adds immense value.
Use landscaping services to maintain vacant property by mowing grass, clearing brush, removing dead trees, and garbage removal. A clean plot reflects better for comps.
By proactively holding the land as-is for a few years, you buy time for market conditions to improve. Selling at higher appreciated values in the future means more cash in your pocket long-term.
If holding the inherited property for potential appreciation does not fit your situation financially or personally, selling the land in Minnesota is an option to consider.
Selling land you’ve inherited can be challenging compared to selling more developed residential or commercial real estate. Understand these key tips before attempting to sell:
Land Takes Longer to Sell
Be prepared for selling your vacant land to take between 1-2 years in most cases. Limited demand for vacant plots means fewer buyers in the pipeline at any given time. With less competition, a land sale also requires more preparation and marketing work for sellers upfront if aiming for full market value prices.
Full Asking Price is Rare
While zestimates, comps and appraisals might indicate a certain “market value” for land, actually receiving 100% of asking prices is extremely rare. Most inherited land sells at 10-20% under market value even for the most competitive listings. Why? Because vacant land has inherently volatile demand affected by economic conditions, buyer abilities, and adjacent development factors you cannot control.
Get Multiple Cash Offers
Given the uncertainties around actual land values and how long closing a sale takes, getting multiple cash offers from potential buyers should be a top priority from the start. Work with local real estate professionals experienced in land transactions to market property through their investor networks via online listings, signs, flyers and targeted outreach campaigns.
Prioritize buyers able to close deals smoothly with proof of cash and flexible closing terms. While each cash offer may come in under the perceived land value, what matters more is guaranteeing a closed sale with money in hand.
Working with a Local Land Company
Another option worth considering instead of selling land yourself is working with a local land acquisition company like Land Boss. For over 5 years, Land Boss has specialized in buying and selling land plots of various sizes across Minnesota.
Our business pays in cash for vacant inherited land at fair market-based prices. Our team handles all closing costs and paperwork too. This makes the land selling experience smoother compared to traditional sales.
While the discount buying approach used by companies like Land Boss means not listing land at full market value prices, their cash offers provide some unique advantages for inherited property owners to consider:
Avoid Long Sale Timelines - Land Boss guarantees purchase offers within 7 days and can close quickly within your timeframe. You skip the often year+ process of selling land plots on your own the traditional route.
Prevent Uncertain Fire Sales - Having a standing cash offer from Land Boss means a sale safety net if you face an unexpected financial, medical or family emergency requiring quick funds.
Mitigate Marketing Work - You avoid extensive efforts marketing land, managing buyer inquiries, negotiating offers and coordinating closings. Land Boss handles the full land sale process start to finish.
Researching options with both traditional and land buying companies gives you maximum choices. Evaluate the pros and cons based on your personal financial situation and priorities before picking the best path forward after inheriting property.
Developing the Land Yourself
If holding onto the inherited land long-term and improving it appeals to you, then land development may be an option depending on property size and location feasibility.
Here are a few types of land development projects to consider:
Residential - Developing subdivisions of new single-family homes is common for vacant land plots sufficiently sized from 5-50 acres located close to major highways and thoroughfares for commuter access. Work with civil engineering firms on subdivision layouts and obtain needed permits. Partner with home builders to take on construction while you focus more on prepping land sites, roads and utility infrastructure initially. Expect 2-5 year time investments before seeing profits.
Commercial - Retail complexes, medical office buildings and shopping centers with leased tenant spaces can be built on land parcels along high-traffic corridors near population hubs and intersections. Work with commercial real estate developers and brokers to assess demand feasibility, establish pre-lease commitments, and finance projects pre-construction to mitigate risk.
Industrial - Warehouse, manufacturing plants and distribution facility projects pair well with vacant land sites located close to interstate highways, freight rail hubs and shipping corridor access points. Partner with industrial construction firms to tailor specs to tenant needs and pursue job creation incentives or tax breaks on developments which promise local employment growth.
Recreational - Large rural land plots allow for a wide variety of recreational developments like golf courses, RV parks, camp sites, athletic fields, shooting ranges, off-road vehicle trails etc. based on terrain and natural resource attributes. Reach out to hospitality and recreational companies to assess partnership opportunities.
While developing raw land requires more upfront capital, time commitments and risk compared to simply selling land, the profit potential over the long run can make the effort well worth it if within your means.
Inheriting any asset, including vacant land, in Minnesota creates an important financial decision point on what to do next. From paying off debts, holding long-term, selling fast, or developing the land yourself, make sure to clearly analyze your situation first.
Consult with professionals like legal advisors, tax experts, land developers, real estate brokers, and local land buyers to learn about all options available before deciding. While inherited land can become a lucrative asset, it also comes with its share of challenges. With proper planning however, your newly acquired property can be monetized to its full potential over time through strategic decision-making.
Frequently Asked Questions (FAQs)
What taxes apply when inheriting land in Minnesota?
Inherited property in Minnesota may be subject to estate taxes at the state and/or federal level. The taxes owed depend on the fair market value of assets inherited and relationship to the deceased. Consult with an accountant or tax attorney to determine tax obligations.
I inherited vacant land with my siblings - what are options for one of us to buy out the others’ shares?
If co-inheriting land with siblings, one buy out option is having an independent appraisal done first to determine current fair market land value. Then remaining heirs can use that price to guide negotiations in transferring full interest/ownership to a single sibling through quit claim deeds and cash payments.
A portion of land I inherited has wetlands on it - am I able to develop or sell it?
Wetlands are subject to special regulations on usage and development based on Army Corps of Engineers and Minnesota state laws. Before developing or selling inherited land containing wetlands, conduct surveys first to determine what building limitations may apply to such portions.
What expertise is most valuable when making decisions about plans for inherited land?
Legal, tax and real estate professionals provide the most valuable expertise on assessing options after inheriting land in Minnesota. A real estate attorney can advise on title transfers, contracts, liability risks etc. Accountants/CPAs can explain tax impacts. Local land developers, brokers and acquisition companies can consult on maximizing land value based on location, demand and market conditions.
What types of documentation should I collect when inheriting a property?
Vital documentation to obtain on inherited land includes: deed, title insurance, property survey maps, mortgage/lien disclosures, tax bills going back 5+ years, zoning/permitting records, utility maps, assessment/appraisal history, insurance documentation and inspection reports covering property conditions.
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