Congratulations! You own the best investment on earth….earth! You are one of the smart folks who own a real asset and not paper saying you own 1/1,000,000,000th of Amazon or Facebook or some other paper that can be worth a hell of a lot less any day of the week.
But how do you sell your property for it’s full market value? Well, you can go the traditional route and work with a realtor and or broker, have them take perspective buyers out to the property, deal with the tire kickers and the folks who aren’t qualified to buy the property cash. What if your property isn’t worth more than $100,000 and it is simply raw land away from large metro areas. Like millions of others you can let your property sit on the market for months or even years, all the while waiting for the buyers to low ball offer you and for the realtors to still take a 5-10% cut of “your equity.” Or, you can get smart!!!
What do you mean Trevor? I mean you can make more money, faster than everyone else who does the lazy thing and hopes and prays that the buyers find your realtor’s listings on the MLS. How do you do so? Simple, you allow owner financing for your land!
But I don’t want to carry paper, and I don’t want to deal with buyers, and I don’t want to make more money Trevor, blah, blah, blah! If you were smart enough to buy a true asset, learn to maximize your dollars and give yourself multiple exit strategies. Investing is a grown up activity, so start acting like a grown up and not a toddler. Now on to the real info.
Let’s say I have a nice 40 acre parcel in Coconino County, AZ, that has some pitch and roll, with good juniper cover and good county road access. You call the realtor lady and she says it is worth $40,000 and she will list it for you for an 8% fee, a common number at these prices, believe me, realtors don’t like selling these and want a higher percentage in fees to deal with the headaches. You go to Zillow and see three other properties in your parcel area that are all listed for $38-$41,000 so you know your realtor is on the money. But then you ask her how long many of these properties sit on the market…she get’s quiet and then tells you 6 months to two years! You go quiet, she goes quiet, you exhale and then think about how you are going to get this done before 2 years.
Well, you have the power to sell it very quickly and often for more than the competition! How do I do that? Simple, you offer owner financing on your parcel. But isn’t that shady and backhanded and other negative words that realtors like to make you feel when you say the words “creative financing” around them???
Not hardly, and that is because most realtors/brokers have no idea that owner financing was the original way people bought and sold land! There were no big banks in the US early on that asked for 20% down and a fixed rate mortgage or promissory note, nope, there was none of that. There was only cash deals and owner financed transactions with promissory notes, aka promises to pay what you said you would pay. So, when you offer owner financing you are getting back to the basics of real estate, not the Capital Farm Credit or Bank of America.
So, you have decided that you are open to owner financing, now what? Well, you have opened yourself up to being Wells Fargo of your own little land empire. In the case above we are going to do a couple things that most people do not do. Why do they not do it, they cling to the belief that cash today is king and like J. G. Whentworth, it’s their money and they want it now. Well, the market doesn’t care about your feelings, and the raw land market itself is especially ripe for a little self restraint today, in order to make a ton of money tomorrow.
So, these 40 acres you have can be sold for $44,000 with $2,200 down or 5% down with a loan amount of $41,800. This total is paid out over 12 years or 144 equal payments, with 9% interest for a payment of $475 a month. These payments are made for 12 years for a total of $68,500 of earnings off of your note. All of this is done with no tenants, no carpet, no air conditioners, or toilets, and the new owners pay the taxes. You simply receive your monthly car note worth of payments for the next 12 years. Or an awesome vacation with your family every year paid for simply by the land that you own!
Now say that buyer ends up not wanting the land anymore, they have two options. They can sell it cash and pay you off for the remainder of the loan, or what they often do is simply deed the property back over to you!!! Yep, happens all the time, and instead of you complaining and groaning, you should be doing your “show me the money dance!” Why? Well, you get to sell the land again to another buyer, who will pay another down payment, and start the clock on another owner financed loan!!!!! I have worked with some land sellers who have controlled parcels of land for 30+ years. Now imagine an investment that pays you for decades at a time, like clock work. Now you know why all the tallest buildings downtown have bank names on them!
Remember, don’t borrow from the bank, BE THE BANK!!!