Buying Rentals Through Land Contracts

[Kyle B.]

I'm looking to purchase rental properties, and I recently spoke with a family member who told me that traditional financing for non-owner occupied properties is very difficult in my area (NW Indiana). If you are able to get a loan, minimum equity will be 50%.

He recommended I look into acquiring the property through a Land Contract. I wanted to see if anyone had experience acquiring properties through this method. If so, I'd be interested in hearing how to begin structuring a deal like this. I'm assuming you would need an attorney to structure the contract and make sure both parties understand the agreement.

From my understanding, this is essentially seller financing, but is there a specific difference between this and land contracts? If so, what are the pros and cons of each method? Is this the best financing option given that traditional lenders are scarce?

I'm hoping other BP members have experience in this area.

Thanks,

Kyle

[Bill Gulley]

Land contracts aka contract for deed is an installment purchase contract where the seller retains title until the contract provisions have been met. They can be useful in buying rentals from landlords wanting to get out of the business, provides a steady income at a lesser amount without the headaches.

There should be a really good book written about CFDs, but there isn't! I suggest you look up threads here as they have been discussed. Also search for Subject-to, Sub-2, they may be very similar and to a lesser degree Lease-Options. They may all involve issues with the "due on sale clause" another thing to search for.

They may also be seen as a financing conduit and subject to your State SAFE Act. I also never do any of these with internet or guru documents without first seeing your attorney.

Study some more and ask more specific questions to address your concerns, there will probably be many. :)