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How to Make Money Doing Owner Financing On Homes

19 April, 2011



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    Hire an attorney before starting the land contract process. You want to be well-advised about what you’re getting into. This means understanding your rights as a seller, along with the relevant laws relating to land contract deals in your state. You may also want to discuss structuring your land contracts under a business, such as a limited liability company, if you’re planning on having more than one and making any significant amount of income from them. Your attorney will be able to advise you as to whether a land contract is the right option for your situation. If you decide to go ahead with a land contract, work with your attorney on coming up with the standard terms such as contract length, monthly payment, amount of deposit, interest rate and what you require to qualify a buyer.

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    Partner with a local real estate agent who deals with land contracts. Tell the agent you have some properties you’d like to put on the market with land contract terms. Be sure to thoroughly explain your terms and conditions. Real estate agents will be able to filter through the potential buyers and only direct good prospects your way. This will save you time and money in the long run.

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    Negotiate the price with your buyer. You may need to be a little flexible here. For example, you may have a buyer who cannot afford the monthly amount you’re asking for, but can afford a higher down payment to cover the difference. Make sure that you’re making a decent profit on the deal. At a minimum, you should be getting at least 7 percent to 8 percent interest on your property in addition to the agreed-upon selling price.

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    Keep the taxes and home insurance in your name. Land contract owners who allow their buyers to assume these policies in their name can end up paying a lot of money if the buyer backs out on their end of the deal. It’s best to keep these items in your name and incorporate the amounts into the buyer’s monthly payments. You may also want to consider purchasing additional umbrella insurance policies to better protect your investments and reduce your overall liability.

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    Have your attorney draw up the final contract after you and your buyer have negotiated all of the terms. The contract will become legally binding after both parties sign the document.

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