Indiana Land Contract - on the fence

5 Replies

I have a duplex in a crummy neighborhood, but with awesome rental income potential as there is a shortage of rentals available in the area.  I am totally uncomfortable going there-even to do painting, cleaning, etc. myself, so I don't want to be involved with any more repairs or upgrades.  I've had it for sale for 2 months, and nearly everyone who has contacted me about it is looking for seller financing.   It's only a $15K sell and I'm ready to be rid of it-but seller financing feels very risky to me.  

On a note that small, should I bother with the expense of getting a third party servicer for payments and  escrow? If I'm the loss payee on the HO policy, will that insurance company notify me if the buyer drops his coverage?  How much and how many months would it take to foreclose if the buyer walks away?  

It feels like a lot of risk--I'm pretty trepidatious about new things.  I know it could be a way to squeeze out some more money from the house, but the worst case scenario keeps creeping to the forefront...that I'll be out money and be stuck doing this all again in a couple years.  

Any advice will be gratefully accepted!

Thanks for your reply.  Quick, too!

I own it outright-and the offers I have gotten have been from people who have very little money to put down ($700-1500).  The last offer is from a guy who has the maintenance skills to be able to handle the repairs that will spring up, but I'm concerned about him being able to make payments if a unit has vacancy or if he has to evict a tenant for non-payment.  

Ideally, I think it'd be wise to use a third party servicer for payments and escrow expenses, but that's an extra cost for buyers who are only interested in the deal because they don't have much money to start with.  I see much going wrong that would make a buyer default on payments and I don't know how much a foreclosure would cost me (thousands?).  

I sold a house on contract in Indianapolis I was hesitant but I needed to sell it. So I went 10% down and $550 a month for 3 years and then they have to get their own financing or I have the right to take the property back. You could do something similar, it gives them time to fix it up get it rented then find their own financing. Maybe set 1 year time limit, really comes down to what you are willing to be comfortable with and how bad you want the money.

Like with any investment, there are always going to be risks, and I think it really comes down to the kind of risk you are willing to tolerate. In this case, perhaps for your peace of mind and to increase the chances that the tenant-buyer will not end up having to be foreclosed on, make sure to secure a decent down payment. I think @Brian Gibbons is on the right track. You could do a 5-7K down, with a 5 year balloon amortized over 30 years, and an acceptable monthly payment. 

Also, like he asked, you need to take into consideration if you have an existing mortgage on the property.

I think you should go for it! It'll give you experience and help you overcome future hesitation a bit :)