land contract on a free and clear

Hi all;
I had a seller contact me; she wants to sell her free and clear house. She currently has a renter in there for$900/month. She wants roughly 115K; comps are more like 90-99K. She doesn’t want to finance long term (she is 87) but might be interested in a short term note, ie land contract with a 3 year balloon.

I don’t want to purchase outright; as she wouldn’t sell on long term financing, I was just going to wholesale it, but I wasn’t sure how to structure. I would like to owner finance as above and either assign to an investor (who could then rent it or sell it) or to an end buyer who wants to buy on those terms. Does one simply do a 12 month interest only calculation to figure the monthly payments, or use a basic mortgage calculator to figure out payments on a 3 year amortization schedule? I have not done too many land contracts and just need some guidance on how to structure. Thanks!


Eric, Get the price down where it belongs, maybe a bit lower even. Negotiate the smallest interest rate and downpayment. assign it to an end buyer at a higher price greater interest rate and a bigger downpayment. Now you profit from the bigger interest rate and downpayment and price diff… I think I missed something here, anyone wanna give me a hand. Herbster

Herb is on the right track I believe. My opinion is this. First, to look at her situation and determine WHY she is selling. Secondly, I’d give her two options. Cash at steep discount, or offer her payments (short term) to allow you time to find a buyer of your own. Since you point out that you don’t wanna buy with cash, I’d point out as best I can to the elderly lady that tax implications of taking a lump sum of money in one shot versus offering her payments of some sort that she can rely on month after month. I’d try to do Owner Financing as my entry, and probably if things are favorable do a simple assignment on exit. This means negotiating with the lady an offering her a reasonable monthly amount each month while still allowing you to cashflow nicely. It of course requires understanding the taxes and insurance payments, and who pays the utilities (I assume it’s the tenant 100%). If you do pick it up as Owner Financing on entry, you can then advertise "Owner Financing! No bank qualifying! Income producing home! 30k down & take over financing! 555-555-xxxx, or something along those lines. It will get the phone ringing. My bet is you’ll cash out really fast, making you a winner, the old lady a winner, and the buyer a winner. Win-win-win. But of course you’d have to know the situation here properly. This is also assuming the house requires no repairs and the payments are current etc. But this would be an option if she is open to you taking over payments short term. If you sign it up on Owner financing, you won’t put a down payment down, you kick back a few hundred dollars to her, pocket some of the monthly yourself, which also relieves her from having to play landlord. Other option is simple. She’d have to accept a steeply discounted cash price pure and simple.


The only way that property is a deal is if the seller will allow a subordinated deed and you can make your loan out produce the over leverage…

Good luck


This looks like a bad deal. You can’t flip it to an end buyer if the comps don’t measure up compared to her sales price whether there’s a balloon or not. Your buyer won’t be be able to cash you out because their lender will only lend on the appraised value! BY the way, no investor is going to over pay on a deal so that’s not an option either. Same goes for trying to assign an overpriced deal. Get her to get real on what the property is really worth and re-negotiate if she’s willing or walk if you have to. Leave her your business card and follow up for a few months until reality sets into her brain if ever. It may never. There are too many other deals out there to overpay on one just because it came your way. One of the biggest mistakes new investors make!


Good advise however there are ways to make this a deal… We shouldn’t limit ourselves to only teaching our method… Did I just say that… I need to go wash my mouth out with soup now…

Happy hunting


First get a handle on the current market value of the property and find out if $900 is a fair rental amount or is it lower than comparable rents.

Once you know this, you can make her multiple offers.

  1. Cash offer at 60-70 cents on the dollar.
  2. Offer 75-80% of its value with a small down payment and owner financing with favorable interest terms to you; 3 year balloon.
  3. Offer 85% of its value with some down payment and owner financing (long term balloon or no balloon).
  4. Control the property with an option agreement at 85-90% of its value and find a buyer who will be willing to buy it slightly higher than your option price.

With option 2 or 3 just make sure your payments to the seller is less than what you take in in rents.