Subject: Seeking Advice on Potential Land Purchase
Hello everyone,
I’m reaching out for some advice regarding a unique situation we’re currently navigating. For about 100 years, my family and I have enjoyed being part of a summer community with cottages on a lake, which we’ve been renting from a farmer’s family that no longer wishes to farm.
Recently, we’ve initiated discussions about purchasing the land. The rental agreement grants us the right of first refusal, which puts us in a good position. However, during our talks, someone suggested that we should consider paying in cash to avoid lender-imposed insurance requirements. While I understand this perspective, it raises concerns for me regarding the need for insurance to safeguard our investment and protect us from potential liabilities.
I’m assuming we would be forming an LLC for this purchase. As for the current insurance situation, I learned that our lease stipulates that each cottage owner is responsible for their own liability, both for themselves and their guests. Given this, I can’t shake the feeling that proceeding without proper insurance might be too risky.
Am I overthinking this? Should I be more worried about potential liabilities? Any insights or advice would be greatly appreciated!
Thank you!
Hi there!
It’s great that you’re considering purchasing the land after being part of that community for so long. You’re right to think about the risks involved. Here are a few points to consider:
Insurance is Essential: Even if you buy the land with cash, having insurance is crucial. It protects your investment and can cover liabilities that arise from property ownership. You’d want to look into property insurance for the land itself and consider liability insurance to cover potential accidents.
Liability Concerns: The current lease indicates that each cottage owner is responsible for their own liability, but as a landowner, you might have additional liability exposure. If someone gets injured on the property, you could be responsible, which is why obtaining liability insurance is important.
Setting Up an LLC: Forming an LLC is a smart move to limit personal liability and protect your personal assets. Just make sure you have the right insurances in place for the LLC as well.
Due Diligence: Conduct thorough due diligence before finalizing the purchase. This includes reviewing any existing agreements and understanding the land’s zoning and use restrictions.
Consult Professionals: Given the complexities involved in this type of purchase, it may be beneficial to consult with a real estate attorney and an insurance agent to ensure you have all bases covered.
Ultimately, being cautious is wise, especially when it comes to a significant investment like land. It sounds like you’re thinking ahead, which is a good approach.
Good luck with your discussions, and feel free to reach out if you have more questions!