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Focus on land's future, not past bad investment
Q. We purchased two lots in southwest Florida and one on the east coast back in 1969 when my husband and I were in our 40s, dreaming of retirement. We went to a dinner to answer an ad we'd received in the mail saying we could own a piece of Florida. We never built on the lots and have come to the conclusion that it's costing us too much to maintain this land.
In today's mail we received a post card offering to buy one of our lots for $1,500, no closing costs or commissions, assuming water and sewer assessments. Should we sell? We paid close to $5,000 for this lot and have paid taxes for a good many years. Is this what happens when young people try to secure a better world for their children? My husband and I find ourselves close to the point of giving up. We realize this is a capitalistic system we live under, but it seems so unfair. If you were in our shoes, what would you do?
A. Unfortunately, a lot of Florida property was sold at inflated prices over "free" dinners before the state adopted laws reining in some of the worst land sales abuses. Some of those lots have been developed, although not on the grand scale that the original promoters envisioned. If your lots are in areas where homes have been or are being built, they are worth more than if they are in remote areas.
If I were in your shoes, I would call one or more reputable real estate brokers in each of the two communities and inquire about the market for lots such as yours. A broker can tell you about recent sales and give you an estimate of what your lot would bring as well as an opinion about the outlook for values to increase in the future. Once you have better information, you can assess the offer you have received. Consider whether you want to hold the property and if not, how readily and at what price a buyer might be found. The person who sent you a $1,500 offer undoubtedly thinks the lot is worth more than that.
Base your decision on what's best for your future rather than worrying about how much you paid for the lots. If you are thinking of leaving the lots to your children, discuss the situation with them. This was a bad investment when you made it 30 years ago. There is nothing to be gained by agonizing over it now.
Q. I have been receiving proxies in the mail for the companies in which I am a shareholder. I try to vote on the various proposals to the best of my ability, but I find some terms confusing. Could you please explain the terms "poison pill" and "golden parachute," which come up so often in these proposals.
A. These are devices designed to protect the interests of the company's top executives either by warding off a takeover or paying off the executive if one occurs. Takeovers are not necessarily a bad thing for shareholders, especially if there is a bidding war that drives up the value of the stock. That's why you see shareholder resolutions calling for a vote at the annual meeting to ban poison pills or golden parachutes or to revoke those that already exist.
A typical poison pill gives shareholders the right to receive payments in the event of a hostile takeover. An acquirer cannot swallow the company without swallowing the "poison pill," driving up the cost of the takeover. A "golden parachute" is a sweet deal for an executive who loses his or her job in a takeover. The benefits might include severance pay, stock options, bonuses and the like.
Q. I understand the rules changed and I can contribute more than $2,000 this year to an individual retirement account. What is the new limit?
A. For 2002, the maximum individual contribution is $3,000 -- plus an extra $500 if you are 50 or older. That assumes, of course, that you have at least that much in earned income or alimony.
The limit is next scheduled to increase in 2005.
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-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
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