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|Subject: The Difficulties in Buying Rural Properties||Date: 11/18/2011 10:37 AM|
|Author: inparadise||Number: 61 of 91|
I just posted on the Buying and Selling a Home board our most recent glitch in buying our VR: http://boards.fool.com/the-importance-of-title-insurance-296... Rather than rehash it, I'll let you read it there. Here I would like to discuss the seemingly endless number of road blocks that crop up when trying to buy a rural waterfront vacation property.
Over the years I have encountered the following in our search for a VR:
1. Lack of building code or enforcement at time of construction, resulting in raised structures that are attached to the ground only by the waste line for plumbing. Structure was built in the 1980's in WV, which has improved considerably since then, but left this property subject to the possibility of floating away in a flood.
2. Flood insurance costs that escalated 2,657%, through a combination of a change in the flood plain maps and poorly filed building documents for this home which did need to be built to code in the 1980's in WV, but the documents could not be found. The new flood map now placed the living room 3' below flood plain, but the shed caused FEMA to consider first level to be ground level. It is interesting to note that this property has remained dry during multiple devastating floods that have impacted the area, but FEMA works to a formula, not history. In order to get a decent flood insurance price, the sellers finally had to destroy the built in shed on the lower level of the structure, which was raised on pillars. We questioned the ability to protect the line bringing the well water up to the house from freezing, now that it was encased only in a 4" PVC pipe. The house is still on the market, but we are no longer interested in any WV property, due to the next item. Luck us, I guess, though we sure felt cursed going through the months of trying to talk sense into FEMA.
Further, we looked at buying on the Outer Banks in NC. You can buy some property pretty cheaply there, but if it is one of the properties that is at risk of being swept out to sea in a storm, forget about financing or flood insurance. Nice views though!
3. Gas wells. The process of drilling for gas in shale deposits has gotten much more economical, resulting in a HUGE explosion of gas drilling in several states. While I am mostly focused on WV, PA, NY, and VA, as you can see from the map at this link, there are shale deposits and gas to be reclaimed in many regions of the US and the world: http://en.wikipedia.org/wiki/Shale_gas This is a developing industry, which is not currently subject to many of the regulatory processes, such as the clean water act, that keep a moderating hand on the process. It is important to understand how your area addresses the gas drillers, as there is little to no Federal regulation of the industry. Beyond the risk of pollution to the water tables, which has in some cases resulted in tap water that you can actually set on fire as it comes out of the tap, the noise pollution and excessive truck traffic on roads that were never built to withstand it causes destruction of infrastructure and congestion of roads.
Do yourself a favor before buying in an area on top of these shale deposits and take out the documentary Gaslands from your local library or download it off of HULU if available. With DH working in the refining industry, we are not environuts, but our jaw was dropped in disbelief many times during this movie, which we sought out only after coming across multiple issues in the on line news feeds.
We find that our search for clean and clear flowing water directs us towards these deposits, as the streams running on top of the shale don't tend to retain sediment. We are trying to buy in the midst of the Marcellus Shale deposit in western VA, which we don't think will be developed, but are running into problems from old gas drilling leases attached to the property, and the potential complications from this that I detailed in the first link.
4. Difficulty in finding comps of relative equal value in rural areas with a limited number of recent transactions may result in Fannie Mae not insuring the mortgage and the inability to get a market rate. You can go to a private lender with very high rates and ARM vs fixed rate, or pay cash. The USDA will sometimes insure mortgages that are rural in nature, however not for second homes or business properties. USDA seemingly only insures rural primary residences. The appraisal on our rural VA property was tortured at best, with some comps needing a 75% adjustment to become comparable with the property we are buying.
So if you are not looking for a rural or waterfront VR you may not be subject to any of these issues. Of course, you may be dealing with other issues such as saturation of the rental market.
Care to share how your search went?
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