just wondering what some people think about LC. I understand its different from state to state but I live in WI and am currently utilizing this method for 3 houses. I currently like the style and plan on doing more by filing a 1031 tax form after each sells. Just curios what others think and why more people aren't doing it? Receive the profit, higher sale price, and have no maintenance. I'm guessing people are worried about the due on sale clause. Has anyone even ever seen this happen? Also if it does happen couldn't you just refinance with another institution? Is it safer in that manor to just not file the transfer with the county until the end of the contract? Everything seems to be going great for me and it has proven very lucrative so far. Just thought I'd put the question out there on what others think. Yes I had my real estate lawyer draw up each contract and signed with notary. Thanks Shawn
@Shawn West I love land contract purchases, then rent or rent to own.
DOS is not a concern usually, just make the payments on time and keep the insurance up.
Each state has different repossession issues in case of default is SELLING on land contract. Go buy 100 of 'em.
I agree with @Brian Gibbons
I like buying on LC
The due on sale clause only seems to come up with small community banks. the larger banks either dont notice of they dont care.
I find that a number of my sellers prefer land contract sales to other forms of creative finance when the title stays in their name. I guess it just feels more finished for them.
To your success
I've thought about land contracts but have concerns.
What do you do on a land contract when the tenant does not pay? Wondering if an eviction now been elevated to a foreclosure. Also, what happens when the tenant fails to stop water damage?
Land contracts primarily perform two purposes. One, the deed remains in the name of the seller (easier to reclaim, no foreclosure needed) and two, defers the need to pay transfer taxes (because the deed isn't transferred until the contract is satisfied.
This offers something for the buyer and the seller ... so it can be very helpful. It's no silver bullet, but it can change the outcome of a negotiation.
Originally posted by @Steven Picker :
I have some properties I thinking of selling and I been debating between owner financed,land contract,or lease to own ,vs just traditional sale Is land contract the most secure with a lesser tax result?
Where are your properties? Cali?
I live in Los Angeles and the closest thing to a land contract is either an installment sales contract or a contract for sale
It's so pro tenant buyer in the state it's hard to get the property back in case they default
You may want to consider doing some kind of contract for option to purchase and a lease, finish the lease and then they get the option to buy which is held in escrow
I would advise you to find a real estate attorney that knows the judges of the landlord-tenant courts and the foreclosure courts in your jurisdiction
Los Angeles is not San Diego, and is not Oakland, meaning all areas are not the same as far as how judges view seller financing in the courts
that does not sound good they are actually in riverside county
Great thoughts people. Nice to hear others find LC to be a lucrative devise. I do have one rent to own due to my lawyer telling me it was a better fit at the time. The way he explains it is on a LC you do have to foreclose and rent to own is just an eviction. Have I been miss informed on this? One good thing about a LC is if they don't pay or void the contract in any way they forfeit their down payment and any credit accumulated. Since the down payment is much more than just a simple security deposit they are less likely to not pay or back out. The LC's that I have now take much better care of the properties than any tenant I've had in the past. Not to mention I don't have any expenses other than taxes and mortgage payments. They all carry the insurance with me as an interested party. That's what my insurance agent told me to do at least. Any thoughts or ways others handle the insurance?
you could have the owner put you on the policy as 'additionally insured' this is not unusual, property managers request this all the time.
Good thread guys. I'm trying to figure exactly what the OP is talking about. How would a buy-and-hold investor use land contracts to add properties? Would this constitute a three party deal? Or would the landlord work his LC with the seller, then be free to put a tenant of his choice in the property? Would this be tricky?... also, would the landlord need to get the seller's blessing to rent the poperty to a tenant? Thanks in advance.
Hey Tumlin, not exactly sure what your asking but as far as adding properties by doing LC with a home owner I'd think you'd need to have a contract allowing you as the landlord to have full control to sublease. I personally only use LC's for my properties in order to sell at a top price and still make a continual income off those properties until they sell. Then I just 1031 and rehab a new house and repeat. I have not tried a sub to offer yet but that is my next step. Try and get the seller to carry the loan so it doesn't affect my loan ratios. Hope that helps some
@CL Tumlin I'm a buy and hold investor and I recently purchased on a LC a home I hold for rental. The contract was just between me and the seller and then I did a few repairs and put in a tenant of my choice. I did get written permission from the seller to rent the property which wasn't a problem at all. The only potential problem I encountered was the water department not letting my tenant put the water in his name without my sellers permission since the water department in the area I invest in does not recognize land contracts for whatever reason. The seller just contacted the water company and gave them permission for them to allow the tenant to have the water put in the tenants name and all is good. This was in Ohio.
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