Land Contracts

General Real Estate Investing
1

I was reading a post and it stated that a good way to start with little or no money down could be setting up a land contract. Could someone please elaborate on this. That is a new strategy to me. Any and all replies would be appreciated.
Thanks

2

A land contract is where you purchase a property but the seller also acts like the lender. You will make payments plus interest to the seller for usually up to 5 years. After that, you will need to pay off the balance by getting a bank loan. By this time your credit should be good and there will be equity in the property.

Here is a general breakdown:

  1. Inspect the property yourself.

  2. Discuss terms with the seller including sales price, down payment, interest rate, years of amortization and balloon payoff. If terms are acceptable, move on to #3.

  3. Present a written offer to the seller. Make the contract subject to a satisfactory home inspection. Here are a few sites where you can get forms (Offer to Purchase) that will help you:

http://www.rocketlawyer.com/document/real-estate-purchase-agreement.rl?rlfr=srch:1:1

http://www.lawdepot.com/contracts/real-estate-purchase-offer/?loc=US

Most likely the seller will do a background/credit check. If offer is accepted (i.e. signed and dated), move on to #4.

  1. Deposit the down payment/earnest money deposit with a title company under the Seller/Buyer name.

  2. Hire a home inspector. If inspection is okay and/or seller is willing to fix items, move on to #6.

  3. Have a title search completed and buy Title Insurance. This is often times overlooked but is a very important step to make sure you are buying a property with clear title.

  4. Use a title company or real estate attorney to create the Contract for Deed. Once the document is ready, both buyer and seller will sign and the contract begins.

3

A land contract, AKA - Agreement for Deed, Contract for Deed, CFD is a good place to start if the terms, price and value of the property are good. But you still need money, don’t go in broke and not even be ready in case you acquire a property that passes inspections has good terms and price and then the furnace goes out or some other problems come up.

It’s better to be prepared for the unforeseen, as things often pop up. You know Murphy can get ya!