I'm thinking about selling one of my houses on a land contract. I'm leaning toward 10% down (enough?) and need input on setting the terms. What has worked for you? Thank you..!!

Steve,

Why?

Contract sales are extremely risky to the seller, FULL of legal pits for the seller to fall in to. They are now a part owner with equity. They have ownership rights equal to yours m

You lose control, they can dismantle the house, they can order all new windows and have a lien put on your house, you lose your depreciation tax shelter, you have to pay tax pay tax on the sale...

(The concept that the taxes are spread out over time is an illusion. You still pay full taxes, just over a long time. Same diff. No benefit to you. But LOTS of extra bookkeeping and tax work.)

Either do Rent To Own (must do it correctly!) or sell it outright and move on.

I just did one with 5% down. I don't think I could get 10% in my market, but I might try it.

I used 10-year, no interest, hoping this will give them the incentive to stick with it. Payment is about the same as rent, including T & I. So, in 10 years, they will have a paid for house.

Here is the rule of thumb: Owner Finance (also called Land Contract, Contract for Deed) is good for the tenant/buyer and bad for the LL/owner. If you buy a property on contract from a seller, you KNOW you are a responsible party and will pay the contracted monies.

When you sell a property via contract, what you are doing is handing control of your property away for a promise--because that is all a contract is--a promise to pay an amount for a period of time. No mater how long you have known your tenants, tenants have tenant mentality, and that is a very high obstacle to overcome. If you sold to them and they paid you in full with a bank loan, you wouldn't have to care what they did with your former property. But if you sell and take payments, THEY are the property owners and you are only 'the bank.' As the owners they can: fail to pay the taxes, fail to have property insurance, and of course fail to pay you! They can make physical changes, without pulling permits, engage and refuse to pay contractors, incur liens against the property, and eventually when their home-owning dream overwhelms them, they can just walk away.

IN order to get your property back you will have to foreclose on them just like a bank does. It is a long and expensive process, and the courts like to give the poor 'homeowner' time and every chance to fight the action. When you finally get the property back you will have to pay the back taxes, engage insurance, satisfy the liens, and repair the property back to the state it was in when you'sold'it.

Randy,

A judge jsut threw out my land contract because it did not have an interest percentage clearly stated. (I was giving them a flat $50 per month toward principle but their atty, MY atty, and the judge all went into a tizzy!)

Steve,

If you take the house back the court can require you refund every penny they paid because you got the entire house back, not part of it.

Please! No land contracts anyone!

BRAD