Land Contract vs Traditional loan

[Jonah Walker]

I have a friend that is selling his rental property for $180,000. He was making $1,500 a month. He is offering to do a land contract with me, so basically owner financing, correct? Anyways. He was talking about a 30k down payment, with a 9% interest rate for 4-5 years. 

The benefit of this, in my eyes, is the ability to purchase another home with a traditional loan in the near future. 

But, I would be a first time buyer, so a lower down payment is appealing as well as a much lower interest rate. But, it would be harder to get a traditional loan on a second property in the near future.

All of this is assuming I can get a traditional loan. I was preapproved, (I dont know how much that really means), about 6 months ago for $200k at about a 3.2% interest rate.

I am hoping to get some input, maybe have someone run the number for me and see the big difference. Or correct anything I may have misunderstood. I am a 24 year old trying to get into the real estate game and any help at all would be appreciated, thank you! 

[Casey Mericle]

You’re right! In reality I just wanna put it in his head that he’s got options, not necessarily to go through with the 1031. An alternative to the 1031 is if he’s lived in the property for two years he can get up to $250,000 tax free if he single, or $500,000 if he’s married tax free.