What To Do After Inheriting a Land in Texas?

Inheriting land in Texas can be both an exciting opportunity and a complex responsibility. The Lone Star State boasts vast expanses of diverse terrain, with over 141 million acres of private farms, ranches, and forests as of 2021, according to the Texas A&M Natural Resources Institute. This inherited property could be a valuable asset, given that Texas land values have seen a steady increase, with the average price per acre rising by 25% to $3,725 in 2021 alone. 

However, new landowners often find themselves at a crossroads, unsure of how to manage or maximize the potential of their newly acquired property. Whether you've inherited a small parcel or a sprawling ranch, understanding your options and the unique aspects of Texas land ownership is crucial for making informed decisions about your inheritance.

Learn About the Land Itself

The first thing you'll want to do is gather all the details you can about the land itself. Where is it located in Texas? How many acres or square feet is the property? What are the geographic features of the land? Is it flat, hilly, wooded? Are there any bodies of water on the property like a creek, pond or lake? Are there any structures or buildings on the land already?

You'll also want to find out details like who owned the land before, are there any leases, liens, taxes or other encumbrances on the property. Understanding the ins and outs of the physical attributes and financial considerations tied to the land will allow you to make informed decisions.

Decide What You Want to Do With It

Now that you have a good foundational understanding of the inherited land itself, it's time to start thinking about what you want to do with it. There are many options available to you as a new landowner in Texas:

• Sell the land outright
• Develop the land yourself
• Lease the land out for farming or drilling
• Hold onto the land for future investment

Determining your goals for the inherited property early on will help guide your decisions. If you need the cash payout quickly, selling the land outright may be the best option. But if you don't need immediate funds and want to retain ownership, you may look at leasing the mineral rights or developing the land over time.

The location of the land in Texas will also impact the ideal use. For example, if it's near a major city like Dallas or Houston, you may want to hold onto the property for future development or sale to capture increasing land values. If the land is further out in rural Texas, leasing it out for farming or drilling oil might make more sense.

Understand the Value of the Property

Before making any big decisions, it's critical that you understand the actual fair market value of the inherited land. Getting an appraisal by a reputable land appraiser in Texas is highly recommended. This will tell you the current value of the undeveloped vacant land if you were to sell it on the open market.

There are a few ways to estimate the land's value on your own before getting a professional appraisal:

• Research the sale prices of comparable vacant land recently sold in the same local area.
• Calculate the price per acre by dividing the total land size by the sale prices of similar lots.
• Consult Texas land value maps that show estimated values per county.

Keep in mind that coming up with an accurate valuation for vacant land involves many factors like location, size, available utilities, road access, zoning, soil quality and more. Leave it to the professionals to ensure you get an objective fair market value appraisal.

Pay Off Any Liens Against the Property

Before you can sell or develop inherited land in Texas, you must first resolve any outstanding financial obligations attached to the property. Two common liens placed against land are property tax liens and mechanics liens.

Property tax liens result when previous owners failed to pay their property taxes. These unpaid sums then become tied to the property itself. As the new owner, you are responsible for satisfying these liens before you can get clear title to the land. The specific procedures vary by county.

Mechanics liens are filed when contractors were not paid for work done to improve the property. If any prior construction projects were not fully paid off, you may need to satisfy these debts. Research any recorded liens and follow the legal process to remove them.

Paying off any valid liens against the inherited property is crucial to getting clear title and maximizing your options as the new landowner.

Decide Whether to Sell the Land

For many inheritors of vacant land, selling the property outright is the most straightforward option. This turns your inherited asset into cash immediately without requiring the ongoing work of managing the land yourself.

Selling also makes sense if the land does not fit your individual financial objectives or you live too far away to properly oversee it.

There are several options for how to sell land in Texas:

List it with a real estate agent - This is the traditional option, but comes with high commissions (around 6%). You also may need to front the costs for marketing and advertising the property.

Sell to a land buying company - There are many real estate investment companies that specialize in buying and selling land. This provides an alternative to listing it, but you may sacrifice some value.

Sell it yourself - You can avoid commissions by selling the land on your own directly to buyers. But this requires time and expertise in real estate transactions.

If you decide to sell the inherited land, make sure you have properly prepared the property, researched fair market prices and marketed it adequately to get the best price. Patience is key as vacant land can take over a year to sell in some cases. An immediate cash sale to a trusted land buying company is usually your fastest exit option.

Consider Leasing Out the Land

Instead of selling right away, leasing the land can provide ongoing steady income while you retain ownership. There are several types of land leases to explore in Texas:

• Farming lease - Allow farmers to plant crops in return for rent payments.
• Hunting lease - Lease access to hunters during hunting seasons for a fixed fee.
• Oil and gas lease - Allow companies to drill for oil and gas in return for royalty payments.
• Grazing lease - Grant cattle ranchers rights to graze livestock on your land for a rental fee.

When exploring land leasing, consult lawyers to understand texas laws and negotiate fair lease terms. Also work with land management companies that specialize in administering these types of land leases so you don't have to handle everything yourself.

Develop the Land Yourself

For landowners with the resources and risk appetite, developing vacant land themselves can be rewarding. Of course this is also the most time and capital intensive option.

Some potential development projects include:

• Subdivide it into smaller parcels for resale
• Construct residential properties like apartments for rental income
• Build commercial properties like retail stores, offices or warehouses
• Establish recreational facilities like parks, golf courses or camp sites

Before starting any major land development, research feasibility, get qualified contractors, understand Texas construction laws, and secure financing. You don't want to be halfway through building a property and run out of money. Partnering with a reputable land development company can help mitigate risks.

Hold it as a Long-Term Investment

If the inherited property has strong potential for appreciation, simply holding onto the land as a long-term investment can be profitable. Areas near expanding cities like Austin are seeing land values increase rapidly.

Owning land for investment purposes still requires ongoing property tax payments and liability considerations. You also need a longer time horizon to realize gains. But as Texas' population and economy grows, properly selected land that you inherit today could exponentially increase in value over decades.

Working with a land management company helps make owning investment land more passive. They handle issues like taxes, maintenance and maximizing lease income while you retain ownership.

Don't Rush Your Decision

Inheriting vacant land in Texas provides many exciting opportunities if handled correctly. The key is being strategic and not rushing into decisions before fully researching all options. Get professional help from attorneys, appraisers and land management experts to ensure you maximize this inherited asset.

With a thoughtful approach, inherited land can be a true gift and valuable addition to your financial holdings for years to come. Texas real estate is a proven long-term investment if developed intelligently over time. So be patient, make informed choices and enjoy the rewards of becoming a Texas landowner.

Final Words

Inheriting land in Texas can seem daunting at first, but educating yourself on the options and getting professional guidance is key. Don't feel rushed into decisions before thoroughly evaluating your goals and the property details. With strategic planning, you can transform your inherited vacant land into a lucrative income-generating asset or a future development opportunity. Consult the right real estate professionals in Texas to ensure you maximize the value of your new property through leasing, selling or developing it yourself. Handled correctly, that surprise land inheritance could become a true gift that keeps on giving for years to come.

Frequently Asked Questions (FAQs)

What taxes do I owe on inherited land in Texas?

You will need to pay the property taxes on any land you inherit in Texas. These are typically due annually. If the previous owner failed to pay taxes, the amounts due could be a lien on the property that you must clear.

Do I have to accept inherited property in Texas?

No, you are not required to accept inherited land if you do not want the responsibility. You can choose to refuse or disclaim the property within 9 months of the death. It would then pass to the next beneficiary.

Is there a timeframe to sell inherited land in Texas?

There is no legal timeframe in which you must sell inherited property. You may choose to sell immediately or keep the land for decades. If you do sell, allow ample time for getting an appraisal, clearing any title issues, marketing the land, and negotiating a fair deal.

What happens if someone is living on land I inherit in Texas?

If the property has tenants renting, you must provide proper notice as outlined in Texas law before terminating their lease agreement. You become their new landlord upon inheriting the land.

Do I have to pay debts of the prior owner if I inherit their land?

No, you are not personally responsible for most debts solely in the previous owner's name. But any liens tied directly to the property must be paid off to obtain clear title. This includes property taxes, mechanics liens, mortgages, or tax liens.

‍