Land Contract, ideal for first time investor or idiotic?

[Ethen Weaver]

Good morning everyone in the BP community!

My questions today are about land contract and their interest rates.

If I have a finiancier that happens to be a family member that is willing to pay everything up front for a property and then will sign a land contract with me to take ownership of the property in a few years, what do you guys think?

What's the average land contract rate, what's a good rate, what might be a bad rate?

Is this a good way to finace a deal if I am still in college and am not working full time yet and only have enough for a downpayment? Is there anything I should be wary of?

Is getting into business with family a little dicey?

Any information is welcome and appreciated!

[Nathan Coleman]

I was a farm loan officer for several years and saw a lot of land contracts.  It's a popular way for family to transfer farmland or homesteads to the next generation without involving a bank.

There are two ways to go about it.  First, a true land contract stipulates the deed is in the owners name until full payment is obtained, then the deed transfers to the buyer.  This could be years down the road.

Second, the deed transfers and the seller retains a mortgage on the property. Owner financing.

I tend to prefer the second as that mortgage can be more easily refinanced if the seller dies and you're fighting with the wife / estate, the relationship goes south, or whatever.  The exit is much cleaner.

As a side note, one of the smartest estate planning gimmicks I ran across involved an owner held mortgage for a farm.  Mom held the note to the son, and the payments just happened to be the exact amount that Mom could legally gift to the son each year.