The discount my partner accepted in year four was the whole return

@meridian the exiting member picks from a list of three the remaining member proposes, which I thought was backwards until it worked. Outside 10%, third appraiser selected by the first two, cost split, average of the two closest. We never got there.

I move slowly on everything and this thread is a good argument for why. You had to double your carry with no warning and reach for a credit line. Before I buy anything with a partner I want to know what happens when they need money for a reason that has nothing to do with the land, because that seems to be the actual risk, more than growth going somewhere else. Did you and he ever talk about that in 2019, or did the attorney just put the clause in and you both signed?

Also, how did you decide you were funded through 2031 rather than 2027? Was that a number or a feeling?

The mechanism worth separating out here is that the buyout price and the market value of the parcel are two different numbers, and the gap between them comes from what the agreement says rather than from anything about the land. A marketability or minority interest adjustment reflects that a fractional, non-controlling stake in an entity holding illiquid raw land is harder to sell than the land itself. Whether a given adjustment percentage is respected in a dispute, and how it is treated for tax purposes on either side, depends on the agreement's language, state law on member remedies, and the facts of the exit. Both parties need their own counsel, and the tax treatment of a redemption versus a member-to-member purchase is a question for a CPA, since those two structures work differently.

On the carry, @sable's post takes for granted that the remaining member can absorb the full tax bill and the buyout cost simultaneously for the rest of the hold. That is where forced sales come from in land banking. A parcel with no income has no internal source of funds for taxes, insurance if carried, weed or nuisance compliance, or special assessments if a district forms. Doubling an ownership share doubles all of it while the exit date stays exactly where it was.

A useful test before signing any co-ownership on land: model the remaining member paying 100% of carry from year one of the buyout through the far end of the projected hold, then add a plausible tax increase from reclassification or reassessment. If that number only works with a credit line drawn, the buyout right is theoretical. Confirm current property tax classification rules and reassessment triggers with the county assessor in writing, since they vary by state and sometimes by county.

I want income and no second job, and this sounds like a second job with negative income. Four years of paying taxes on dirt and then an emergency negotiation with a partner's divorce attorney in the background. I'm sure the arithmetic works out. I don't think I have the stomach for the middle part.

I want to push on the discount because you're counting it as return and I don't think it is yet. You paid $132,000 for something appraised at $158,000. That $26,000 is only real if the parcel actually sells near appraisal, and the appraisal is on a thin comp set, raw acreage at the exurban edge trades rarely and the comps are probably a mix of acreage sizes with adjustments the appraiser guessed at. What was the comp set? If it's three sales in eighteen months across a wide radius, your $7,900 is a range with a $1,200 error bar in both directions and the buyout was less obviously a bargain than it reads.

Separately, the blended basis is a cost number, not a market signal, and it only lands at $5,900 because the agreement's 20% adjustment priced his half at $6,600 an acre instead of $7,900. What the land itself did is the appraisal: $5,200 an acre in 2019 to $7,900 in 2023, about 52% over four years, roughly 11% a year compounded. That's at or above what a lot of people assume land does at the edge.

@ledger five comps, 22 to 90 acres, 14 month window, radius out to about 18 miles. So yes, wide. I agree the $7,900 is a range. The reason I still count part of the discount is that I bought a fractional position out at a price that didn't require the market to be right, my downside is the parcel, not the appraisal. And your point that the blended basis isn't an appreciation number is right, and 11% a year on the appraisal is worth people seeing.

The question I'd have asked before buying his half is what the parcel can legally become. 40 acres in one tax parcel with a minimum lot size of, say, five acres is eight potential lots and a very different conversation with a future buyer than 40 acres that can't be split without a full subdivision plat, road standards, and a drainage study. Some counties allow a limited number of family or minor splits without platting and some don't, and it changes by state and by ordinance amendment, so read the current subdivision ordinance rather than what someone told you three years ago. If your parcel is splittable in minor increments you also have a way to sell 10 acres in year seven to fund carry instead of drawing a line, which is exactly the pressure you described.

@parcel five acre minimum, and the ordinance allows two minor splits per parent tract in a ten year period without plat. So I have a partial release valve. I hadn't framed it as carry funding and I should have.