Need Help/Advice on Owner Financed Purchase

[Patrick K]

I contacted a local agent who represents someone selling a $200K lot in my city, asking if the owner would be interested in financing the purchase. Problem is, I really have no idea what they would expect, want, or even what a standard deal might look like.

My capabilities would be 10% down, 10-year @ 5-7% is the wheel I was looking for. I could be close, or way off I supposed but if he is not cash hungry seems like a good deal for them.

I just asked if he would be interested without expressing anything regarding terms, in the hope to hear the owners expectations, if he is even interested, to see if we would even be in a similar range.

Any thoughts or help on this?

[Rick H.]

@Patrick K - I'd never want to discourage you, or anyone else for that matter, from building your dreams. However, it sounds like you flirted with the dea of buying land from an established owner and are a bit stuck as what to do.

The biggest concern here is that you really don't seem to have a plan for the land beyond speculating, as a developer might. Unless you are planning on building this out as an owner/user, I'd focus on how to exploit a land opportunity.

It may or may not be a deal. I'd find out what a deal would be. Land is a different animal. You are now playing the "other man's game" and ought to recognize that your training and skillset probably needs enhancement.

Your exit plan is the most important part to start with. What will you do with this and how do you intend to profit? How will you keep this financing going during the interim period?

A good friend of mine bought a great deal of land in SoCal during the last RE boom on selling financing with substantial cash down roled over from prior deals. He refused to study the topic and only sought opinions of friends who had no particular experience or skills in development. When the market turned he couldn't sell, telling me that he figured that 'land was the last area of real estate affected by the changing market.' I thought to my self, where in God's green earth did he come to that conclusion? Anyway, notes came due and he lost it all.

Most land speculators that are successful in the long run are more prone to use options tie up land until they're ready to build or re-sell at a profit (or bail if the market sours).

Keep us posted