This Land is Your Land

google earth

This is an image from Google Earth of the Blessed Little Homestead.  It dates back a couple of years ago, so the Blessed Little Garden Shed is not there.

The cleared field to the far left is not the Naugler property.  I’m not sure where their property ends to the right or toward the rear.

Since people have asked about the property, especially with regard to who owns it, I thought I’d answer that question.

The property (apparently 28 acres, more or less) was purchased by the Nauglers a couple of years ago in the form of a land contract.

Land contracts differ from conventional mortgages in several different ways.

We have owned about a dozen houses in several different states over the years and most of them followed a near-universal pattern.  We put in an offer on the property, got a signed contract with the seller, and then applied for a mortgage with either a bank or a mortgage company.

Once we were approved and signed the closing documents, we got title to the property. The loan was a separate thing. The property was collateral for the loan, but we held the title in our possession.  We were recorded as the owners of the property at the local courthouse, and when the taxes came due, we were billed.

When we paid off the mortgage (either by selling the property or simply by completing all the payments), we got a copy of the paid-off note from the lender.

That’s a typical conventional mortgage.

Since the mortgage melt-down in 2008, the requirements for getting a mortgage have tightened up considerably.  If you remember the whole mess, people were getting mortgages (called “liar loans”) where they fabricated their income and other details that would determine if they qualified for the loan. As a result, they got in over their heads with mortgage payments they could not meet.  The result was a huge disaster.

So, it’s much tighter now. You have to have a decent credit score and some sort of reliable income in order to qualify for a conventional mortgage.

Enter the land contract.

This is way for people who would never be approved for a loan to buy property.

With a land contract, the seller retains possession of the deed to the property until all the payments are made. Since the seller remains the legal owner of the property, it becomes a huge question as to who gets the tax bill (answer: depends on how the contract is set up), or what will happen should the seller declare bankruptcy (answer: depends again on how the contract is set up).

The Nauglers have a land contract. (Click thumbnail to enlarge.)

I have obscured the actual address, but this is the Blessed Little Homestead. Gordon Board and Steve Aulbach do a lot of business doing land contracts under various company names.

There are definite pros and cons to buying property this way.

Pros: 

People with poor or nonexistent credit can get a second chance, and sometimes it actually works out very well. Sometimes the down payment is either small or none is required. All the loan origination fee stuff and the title searches and the mortgage insurance is not required, so that supposedly reduces the payment amount.

And for people like the Nauglers, there probably isn’t any other choice. They have a large family, with a pretty dismal credit history, and most people would be loathe to rent to them.

Cons:

The seller gets the advantage.  Of course, the seller is the person taking a huge risk as well.  People who can’t get a conventional mortgage have financial woes and people who are thinking about lending such a person money need to think carefully about the wisdom of doing so.  The default rate is very high for obvious reasons.

The interest rate is also very high, as it should be.  Higher risk = higher interest rate.

Some land contract properties are “sold” over and over again, with the seller collecting a down payment each time, and with a high interest rate, and with a clause stating that the buyer has to do all the maintenance on the place and perhaps pay all the taxes.  The buyer then at some point defaults on the payments and the seller takes back possession and “resells” the land.

 

 

 

18 thoughts on “This Land is Your Land”

  1. In my opinion, land contracts are the real estate equivalent of payday loans. If I’m feeling more charitable, they’re like the overpriced rent-to-buy schemes offered by some retailers. you pay so much more than you would otherwise butif you’re lucky and persistent you may not lose your shirt.

    Yes, a tiny minority successfully buy the land but many more don’t and have spent more money than they would have otherwise. I wonder if a study has been done to compare the rate of default. I would be very surprised if there aren’t studies – the question is whether they’re available to the general public or if they’re proprietary to the companies that engage in this practice.

    One of the next door neighbour’s to the Naugler’s has property that is valued at over $1 million dollars. If I were that owner, I’d be keeping a VERY close eye on my property line and what can be seen or smelled. There’s something to be said for planting a hedgerow.

  2. I hope that the Nauglers find a forever home someday, a place they can cherish and care for, and be safe and comfortable, and raise their family…A place where they have the time and resources to provide for their children’s education.

    They will have to make sacrifices and compromises, as do we all. They’ve tried their version of homesteading while commuting and it’s not working. I don’t know why the kickstarter funding from last year didn’t get used to substantially improve their living conditions, but unless they’ve got a cash stash somewhere they need more income. Does anyone know if land value is appreciating in that area?

    Thank you for bringing up this topic Blessed Blogger! I understand dreams for get-away-from-it-all unconventional living, but what they have is not all a mama wants for her babies.

    From the satellite view, that land looks worn and maybe trash covered. The way they live now is just too hard.

  3. Land contracts are often fall into two different categories. The first has already been stated that they are similar to payday loans or loan sharking in which the property may be “sold” or “transferred” over and over again. The second category is properties that are not will not sell in the traditional real estate market. Let’s get real for a minute. To create a homestead from scratch off the grid you are looking at a minimum of $100,000 dollar investment. A functioning homestead needs a safe drinkable water supply, a livable building or series of buildings, infrastructure like roads, driveways, or sometimes bridges to navigate the property safely, and some type of reliable power source which doesn’t necessarily have to be a public utility. Even the Amish use reliable power sources like wood stoves and solar panels. Animals, gardens, barns and other items can always be added later. For a more traditional build out you basically the same thing only you may be able to rely on public utilities. However, public utilities can cost big bucks to run lines out to a property which comes out of the pocket of the person trying to make the property livable. Either situation requires a lot of money up front which is why these properties often don’t sell by traditional methods and end up in land contracts. Land contracts don’t happen on highly desirable properties or on properties that need very little build out to be made functional. I have no respect for Nicole or her unemployed husband. They have a dream not a goal and as many others have already stated they seem totally unwilling to take appropriate educated steps toward reaching their goals. Goals have action plans, dreams don’t. I pretty much consider what the Nauglers are doing as legalized squatting more than homesteading.

  4. Did the Nauglers NEED 28 acres? A tiny home, goats, chickens, rabbits, some dogs and a small garden. Could work in 2 acres or even less. They probably got a “deal” on 28 acres because it was an awful piece of land, trashed by previous tenants, no water, maybe too rocky to farm.

    A cursory search at http://www.landwatch.com brought up local KY properties that are land contracts, yet very cheap: $500 down and $199/month with 80-120 months to pay. The Nauglers’ property has to cost more $$ than that given the large acreage.

    Let’s look at another scenario:
    1)a small parcel with either a mobile home or small house on it. Landwatch has two listings in Custer, KY: both with home + land at $30,000 asking. Sounds certainly better than an uninsulated garden shed.
    2) send the children to school, Joe gets a JOB, both parents work. This would yield enough income to pay the mortgage. It’s more pragmatic than rehabilitating a large trashed property, which could take years at their pace, and trying to build a homestead from scratch, with little/no capital, nor knowledge base, nor sufficient labor force.

  5. Tangentially related to the topic at hand.

    Jan 10, 2016
    “Boys are headed out to the woods. They have a few spots where they have seen rabbit and deer. The snow will help with tracking.”

    They’re hunting them. Nothing wrong with that but why the need to hunt rabbits if they’re already raising them for meat and fur?

    However, aren’t they hunting deer out of season (zone 3) and neither of them are wearing blaze orange. I thought that hunting deer out of season on one’s private property is permissible when they’re protecting planted crops. Do they still need to have a hunting license?

    Perhaps one of the residents can set me straight.

  6. Is the shed to the left and north of the pond the beginnings of their original shed, minus their blue tarps and stick additions?
    Wonder what their taxes are on 28ac., if they are responsible. That alone may be their undoing. It is too bad they didn’t choose a small functional house on workable land with less of a tax burden. There was talk early on about Joe jabbering on about growing pot and making a lot of money. Perhaps that was this property’s draw. Financially of course most see their losses compounding from year to year, however in Naugler thinking, they probably only see the picture as risking GFM monies, and not in the light of healthy growth and development of their children. Again, I see the kids as the losers here, they are the ones who seemed to have worked the “homestead” such as it is. Their childhood memories will be filled with evictions and moving from one place to the next. They really did have a chance this time with the amount of money donated, I hope too someone who truly does have their best interests in mind will guide them and they will take some advice and work harder, rather than relying upon professional grifting.

  7. I seem to recall that permanent structures are not permitted on this land until it is paid off. Maybe the plan was to pay it off really fast by growing a lot of pot…?

  8. I seem to recall that permanent structures are not permitted on this land until it is paid off. Maybe the plan was to pay it off really fast by growing a lot of pot…?

    I don’t know the answer to that. We don’t have access to the specific contract the Nauglers signed. And the pot thing. I know there are rumors to that effect, but there is no proof of that at all. So I would avoid the subject. What I do know for sure is that both Joe and Nicole favor legalization (as do I).

  9. Tekla said, “In my opinion, land contracts are the real estate equivalent of payday loans. If I’m feeling more charitable, they’re like the overpriced rent-to-buy schemes offered by some retailers. you pay so much more than you would otherwise but if you’re lucky and persistent you may not lose your shirt.”

    I share your opinion, too. I don’t know if it is fair to say land contract businesses take advantage of people with poor finances and credit. But would say they may take advantage of the probability that those contracts will not ever be paid in full, and the default rate. And also the consequences of people that may have poor finances and credit history, because they make poor choices. They tend to make the affordability look attractive, to someone that doesn’t likely have the means or cash to buy something, without borrowing. Especially land contracts, on property that is not the most marketable or valued.

    I don’t know, but I expect at some time these land contract businesses may come under a similar scrutiny as banks that are in the business of mortgage loans. Where they established mortgage loans for homeowners and creative financing, lending to people that were borrowing beyond their means. All the foreclosures. The banks were required to take more responsibility in scrutinizing a potential lender’s credit history and monthly income to debt ratio, and more accountability for bad lending practices. There comes a point though, where the borrower needs to take responsibility and own some accountability. Or else as in the bank lending practices, once again the government has to get involved. The government protecting the irresponsible, from their poor choices.

    Not to be discouraging, but they have been there now for what, at least a couple years. Doesn’t look to have been any real improvements or making the property productive. Looks to have been a last ditch type option, when options were running low on merely having a place to live.

  10. It’s also a fact that the land companies are taking a terrible risk when they make these contracts. I do not know what the default rate is, but I bet it’s really high. When I invest money, if there is big risk, I want big returns or I will seek to invest elsewhere. So I cannot blame them totally.

    And there is also an argument to be made that if you cannot get a loan from a bank, you really don’t need to have a loan from anyone. You simply cannot manage money and need to go straighten out your finances and come back later when you’ve learned something.

  11. Kentucky Land Company doesn’t care about “permanent structures”

    All this talk about zoning and permits.

    This is Breckinridge County. It’s pretty wide open. If you want to build your own home you can. The only inspections you need to worry about are the initial electrical installation (i.e. temp power pole and direct meter box fuse panel), and the septic.

    The rest is wide open for a true owner built home.

    Kentucky land has carved countless farms into little single wide lots.

    Bucky is a fine businessman. But what Kentucky Land has done to the county is not appreciated.

    I live here. I’ve seen property resold countless times. If these Mud loving wannabe homesteaders have any sense, they’ll find a better deal somewhere that the community doesn’t cringe when they hear their names…..

    Sorry, but all of us are tired of them. Chances of them ever being accepted and part of the community are as good as unicorns flying out of Hillary Clinton’s ass while a camera films it.

  12. Yes, there is good argument, I agree. As in the land contract though, with a secured loan, probably not too much risk. Unless land contractor does not own the land free and clear, and a default. If the property is not a highly marketable and/or desirable, a land contract and tenants may be the more profitable to the land contractor, or at least in getting a return on initial investment. As opposed to trying to find an outright purchaser for a not so highly of a desirable property. To which the land may be a little restricted or undesirable for perhaps farmland and so on. And without improvements like water and utilities, that will probably require more investment up front to a purchaser, for intended purposes of the property. IMO, doing a land contract for 28 or so acres, when you don’t have a pot to piss in (figuratively speaking), does not sound like a rational transaction. And without liquid assets like cash for the needed improvements, because it didn’t even have a dwelling or working utilities. And cash also for needed equipment/tools to work the land. Just with the gardening, how often do you see raised beds and tires for garden planting on a rural 28 acres homestead? That looks more like patio and urban gardening. That has to be laughable, for other rural farmers and homesteaders. One would suppose they researched the quality of the property for their intentions, before entering the land contract. And knew it was not good soil for homestead farming, much less gardening.

    In my opinion and observation, Joe and Nicole will always be dependent of others for their finances. Previous history and performance is good indicator of future performance. Have they ever been self sustaining and independent in managing living expenses for an extended period of time? Self sufficient on their own earned income? It’s not even imaginable that a continuously growing family, now 13, can survive even somewhat barely comfortably, with their income to expense ratio. Not them, maybe not anybody. A lot of what they get by on, has been by others support and financing over the years. And gifts. And unfortunately, by their own doing, they may have exhausted resources in the local community, of givers.

    A suggestion since Nicole at one time had posted on her blog, an interest in budgeting and planning. Dave Ramsey’s “Financial Peace University.” His radio show comes on at noon in the regional area. On the radio 5 days a week, and in some areas on weekends too. It’s very empowering and insightful. Financial freedom. Dave Ramsey was at one time, bankrupt. There is even a Facebook page!

  13. Interesting that Capistan is no longer to be found. Someone asked Pace what happened to the Capistan webpage on the Capistan FB site, and he commented that it was being “rebranded” and would be back in a few months. Now I cannot even find the FB page. Anyone surprised.

  14. lol @ Pace. I’m sure he’s around. Just finding the next way to make it rain, albeit more anonymously than that last cyber baby shower.
    He should try to get the Naugler’s to convert to Judaism. Imagine how many bitcoins could be earned for 11 online/secret bar and/or bat mitzvahs. Could fund some serious Hardees binges for a while. Plus, they’re used to head coverings from that other time they embraced a movement to serve a purpo$e.

  15. Capistan is on Facebook.

    May 2015:

    “We base the estimated returns on the mutual agreement of terms. She has a minimum monthly payment due and an APR on the balance. It’s not only a loan, but venture accelerator services, which means we are coaching her in marketing, accounting, compliance and management. Our close business relationship helps enforce the terms. She doesn’t have any tax filings since the business is new and substantially larger than what she has been doing until recently.”

    How in the world is this business larger than her earlier ones? If they’re coaching her in marketing, accounting, compliance and management then exactly how did she qualify for the loan in the first place? It sounds as though she doesn’t know how to do any of those things and should learn them before obtaining a loan.

    Jan 27, 2016:

    “Capistan (removed), correct on both. No new projects being funded at this time, and we are still working with BLGC.”

    Yes, I would also continue to work with someone who owed me money as I expect the terms of the contract to be fulfilled and I expect repayment.

    Capistan/Pace already tried to raise $1000 when the youngest child was born. That didn’t work so well and it didn’t involve the hard work that goes into a bar or bat mitzvah.

  16. To answer a few questions. I live in Breckinridge County as well. Not far from garfield. We have roughly 5 acres, and according to the last assessment our land alone is worth $10,000. Because my husband is a disabled veteran we get a discount on our property taxes. We pay a lititle over $1000 a year which is included in our mortgage payments.
    As far as hunting, you don’t need a license to hunt on your own land. You can shoot deer in the off season only if they are going after your crops. This is what my husband told me.

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