Owner Financed Land – Should I Buy It?
Owner financed land can be a great investment or a big mistake, depending on the specific circumstances involved, so how can you determine whether you should buy this land or not? There are many factors that you will need to evaluate and consider to determine whether a land contract or land purchase agreement is a good investment or not. The first thing you should look at is the asking price for the property, and evaluate whether this is a fair price considering the current value of the property and the local housing and real estate market conditions. If it is a buyer’s market then more owners are willing to consider owner financed land transactions, because the property may sit on the market for an extended time otherwise.
Finding land for sale by owner that is reasonably priced is not difficult, but the interest rate being charged is another factor that will help determine whether you should buy a property. Banks and traditional lenders are not giving property loans right now, and one of the benefits for sellers with owner financed land sales is that the seller will earn all of the interest income on the financed amount. The interest rate charged will be higher than the prime rate right now in most cases, and can vary from one purchase to the next. Vacant land for sale usually costs much less than a home, but some contracts may ask for outrageous interest rates and should be avoided because of this.
Owner financed land offers benefits to both the buyer and the seller, because no credit check is usually required and anyone with the down payment and monthly payments can purchase property. A number of land investment companies offer financing, and there is flexibility in the down payment amount, the date of possession, and many other variables. Careful research, evaluation, and comparisons will help you determine whether a specific agreement is a good one, or something to be avoided at all costs.