Would you consider a land contract?

Question

My current tenant has been living in my rental for 2 years. She has expressed interest in purchasing it off of a land contract. I'm a beginner when it comes to land contracts. Have you had any success with land contracts?

Nick L. · Answer

@Marc Imhof - that is a lot of great advice and things to consider.

@Hannah Williams - I am not an attorney, but what I've been told by attorneys in my state (Pennsylvania) is that if you enter into a land contract, it is more difficult to get the person out of the house if the deal goes bad; you can't evict them like you would with a lease. I shy away from land contracts unless the person puts down a good chunk of change which is nonrefundable. But I prefer a LC over transferring title.

Marc Imhof · Answer

Hi Hannah, my opinion is that you first decide what you want.  Are you interested in getting out of  holding property and wish to sell it?  If yes, what do you plan to do with those proceeds?  Will that different investment path be as good or better as holding that property longer?  Also, consider the condition of the property, will holding it a few more years mean x thousands of needed updates, for example, how man years are left on the roof and other hardware?   Tough things to consider right?  Then regarding the tenant, money now is better than later if you want to sell - so I'd suggest exhausting all possible avenues with the tenant as far as getting them financed and cashing you out...then if not, are you really going to settle for land contract or instead, let the lease run out and once current tenants are properly, kindly moved out, do a light rehab and get better price?  Knowing your core goals will help you.  A land contract gives you more control than selling with a note - but you also have other risk factors.   Whatever you decide, go pay an attorney to look at it.  IF you keep it as a rental, be sure you are holding and managing it to protect yourself...or if you sell it on terms with financing or land contract, be sure the docs are covering you.   Hope that helps a little.  Good luck!