Owner financing land?

[caseys95m3]

The wife and I purchased land 2 summers ago and it is currently owner financed. When initially purchasing, we sought financing from various local banks big and small but hit a pretty substantial road block. The property borders Honobia WMA and has zero county road access. It does however have access by logging roads. Most institutions require physical and legal access. Our purchasing contract stated if favorable financing terms were not found in 14 days they would pick up the note themselves.

After some research we decide to keep it in house. There are restrictions but the most impactful to some don’t affect us for the life of the loan (10years). We cannot sell the timber or lease to others without permission first. No big deal considering the entire property was logged 12 years ago and no where near ready Again. No interest or need to lease to anyone else. Everything else restriction wise is pretty logical and a non-issue.

There is no water, electricity or cell signal so it very much is just raw land with a 1/2 mile road cut all the way through. Slice of rocky OK heaven.

In hindsight, we would have saved for a higher down payment to secure a lower interest rate.

[M16]

Thanks for the suggestions of the 3rd party loan servicing company.

One suggestion that I received was to should have a clause that if the buyer wants to pay off the loan early, all interest is to be paid. That is, all interest that would have been paid over the long term. Keeps you from losing a load of cash on an early pay off. The buyer may want to sell the property and make a profit and this way, you would still get the total amount including all interest.
Any thoughts of this idea?

Good luck. I’d love to find a buyer that would fall for that.

[Burnadell]

Thanks for the suggestions of the 3rd party loan servicing company.

One suggestion that I received was to should have a clause that if the buyer wants to pay off the loan early, all interest is to be paid. That is, all interest that would have been paid over the long term. Keeps you from losing a load of cash on an early pay off. The buyer may want to sell the property and make a profit and this way, you would still get the total amount including all interest.
Any thoughts of this idea?

I'm pretty sure prepayment penalties are illegal, at least for financing INSTITUTIONS. Also, I'm pretty sure the Dodd-Frank Act only pertains to financing owner-occupied property, i.e., homes.

Foreclosing on raw land should be a fairly simple process, albeit one must follow the legal procedures/steps. I see no major downside to your financing the purchase with 10% down over 10 years if you don't need/want the cash from a cash sale. If you can get more down, all the better. I would charge 7-10% interest. Good luck.

[RingSteel]

thank you.

[bowhunterhelm]

My dad did this once. The buyer was consistently late on paying, it was always a headache collecting payment. My dad finally got tired of pulling teeth to get paid and let him get backed up on payment and had him evicted. My dad got the land back and still owns it today. This has been 15 years ago.

He had to pay a lawyer but ended up with money in his pocked after it was all over. It wasn't worth it to him though.

[3whunt]

Agreed on a lot of the above. We owner finance a ton of property. Biggest reason for us are cash payers that don’t have credit due to not wanting to pay taxes. Most are of the brown persuasion. I wouldn’t hesitate selling owner financing if you can afford it. No risk at all if you put the right restrictions.

[Huntingfool]

I have owner financed multiple properties. I do suggest 20% down. I also highly recommend have the buyer get term life insurance in the amount of the loan and you as beneficiary. If he or she dies then you are covered

[tps7742]

I have owner financed multiple properties. I do suggest 20% down. I also highly recommend have the buyer get term life insurance in the amount of the loan and you as beneficiary. If he or she dies then you are covered

So do you recommend to the buyer to get term life insurance or put it in the contract?

[M16]

I have owner financed multiple properties. I do suggest 20% down. I also highly recommend have the buyer get term life insurance in the amount of the loan and you as beneficiary. If he or she dies then you are covered

I don’t need to be covered. Either they keep paying or I repo. I’d rather repo instead of getting paid off.

[tps7742]

I don’t need to be covered. Either they keep paying or I repo. I’d rather repo instead of getting paid off.

Agreed!
I just thought that’s mentioning a life insurance policy was different(trying to be politically correct