Posted by Ed Copp (OH) on August 15, 2000 at 17:49:11:
Steve,
If I understand your post correctly you are talking about purchasing the land contract (note). In this process you would get the deed, but it would be subject to the existing land contract (note). So what you are purchasing is the income stream.
You mention using the equity in your house to finance the purchase. The example that you give is excellent. You borrow at a low cost and use the money to buy this contract that produces an income for you. You are concerned as to what may happen if you have to forclose, and I say this; if you do have to forclose you could sell the property the same way again. There are also other things you could do like subdividing or developing yourself.
You might also want to post this message on the note board, as the income stream (the note) is really what we are talking about here…ED
I am looking to buy a 50 acred piece of land from a potential seller. He recently (8/1/00) secured it on a land contract to a buyer who is interested in building on the property. They (of course) have below average credit, etc. so could not get traditional financing. He is financing 60k to them (with nothing down) for 72 months at 10%. This is approx 1,111/month payment for them. He is looking to sell it for 43k to me. The “tenants” are paying for all taxes and insurance.
I have a large amount of equity that I could use in my own house whereby I could write a check for the entire 43k and have an interest only payment on my equity account for 10 years (if necessary). This equates to a 358/month payment for me which means I would clear approx 753/month. The property is wooded and there have apparently been some new homes built around there the past few years. It is not near a large city, though (just FYI).
The lease/option was executed through a regular Board of Realtors contract and there is nothing really “fancy” about any of the contract language.
This seems like a pretty good opportunity for me. The only downside I could see is having problems finding another buyer if these people foreclosed, and not being able to buy other properties because my cash would be tied up in this.