Option investments indianapolis

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Let us be with you every step of the way for you and your family. Online access for Stifel clients, providing detailed account information, market data, research, and more. Lets start with the simple premise that selling on land contract is an exchange of investments. You are trading your real estate asset for a paper asset a note.

In that difference lies the pros and cons of this investment as you consider it for your portfolio. A land contract is a sale of the real estate to a third-party and the owner of the real estate becomes the lender or mortgagor. A contract sale document is prepared when the decision is made to sell and the terms have been finalized. With a land contract, the buyer gets a contract from the seller stating conditions that must be fulfilled for the buyer to get the deed. The seller retains the deed.

The buyer makes payments on the contract. Once the contract is fulfilled, the seller hands over the deed. Pretty similar to the process of buying a car with a loan. The lender holds the title until the loan is paid off. The buyer has possession of the car, but not the title. As the potential lender in this transaction, the owner gets to control the terms.

This is a big advantage as you can insist on terms that work for you such as length of the contract, interest rates, payments. You also can complete background screening to determine if anything might show up about your borrower that causes you to decide not to enter this transaction. The seller now holds a note that provides a cash flow stream.

The only expenses the seller might incur with that note is in the event of a collection or default. The seller is the bank and will collect monthly payments of principal and interest. Depending on the terms negotiated, the seller will also receive some cash as a down payment at closing. Very few land contracts are significantly long-term in length in excess of five years.

The objective is for the mortgagee buyer to develop credit and the ability to qualify for a conventional, less expensive mortgage. As an investor, you have a balloon payment that is to be expected on the back-end. The seller may also consider offering an extension in the contract so if the buyer is unable to refinance at the given time, slightly different terms go into effect for example a higher interest rate with an extension of the term.

If the home you wish to sell is occupied with a great tenant, this might be a solution for achieving everyone's long-term goals. If you, as owner, really would like to sell the home, and the tenant would love to become a homeowner, consider a land contract arrangement.

This process is much faster and easier than waiting for a tenant to go through all the hoops of purchasing using traditional mortgage financing. My experience is that if a tenant can qualify for a conventional mortgage they will do so and purchase the home outright. You must accept that you are taking on a risk that the buyer is not creditworthy as defined by traditional mortgage lenders. There are many steps to determine if this is a risk to accept but remember you have a huge advantage.

A contract sale to a tenant should be a tenant that you have experienced a year or more of timely rent payments. These are people who have shown responsibility and a priority to their housing obligations. So, you are working with a buyer and the land contract option seems appropriate. The following are the basic components that will need to be determined and negotiated if needed.

Note: references are made to the "seller" who is no-longer called "owner". After a land contract is executed, the Buyer becomes the "owner".