Optioning Land vs. Entering into a Land Contract
Seller based financing is at the core of land contracts which in essence are real estate transactions which are beneficial for Houston investment property. Such a transaction does not require the express sanction or permission from a financial institution. Other terms and conditions like rates of interest as well as payment schedules can be akin to conventional loans.
Land contracts are of great utility to those who are facing problems in getting finance for real estate through normal modes or routes. This is an agreement where the buyer can take possession of the property even though all payments are not over. The title of the property however gets transferred to the name of the buyer from the seller after all dues are cleared. The contract involves a commitment from the buyer to pay a fixed amount each month. Part of this amount goes towards the principal of the loan, with the balance being taken by the seller as rent. After the full payment has been made, the seller would transfer the deed or title of the property into your name. If you want to lease the property you can only rent it out or re-lease it to another person, since you don’t own it yet you cannot offer any equity.
What are the elements in a land contract that deem it to be fit for investment property? In this article we would like to explain this, as this is a Houston real estate investment article for beginners. In the case of owner financing, the seller generally allows a lower rate of interest if you agree to the price that is asked for by the seller. It is possible to complete the land contract or deal by agreeing to the terms and completing simple documentation formalities. Then the property can be rented out to a tenant. You can easily start at break-even point, with rents being increased after 6-12 months or so.
Another investment alternative is that of optioning, which is mostly used in the case of older homes in developing areas and for vacant land prospecting. In the case of an option, the potential seller is given some money in order to induce the seller to sell the property at pre-defined rates at a specified time.
There are many farmers who live off their land and do not expect to get rich. In many cases, farmers would rather give money to their children rather than farmland. As suburbs start getting developed, farms today become subdivisions tomorrow. Hence using farms as vacant land for the future are desirable options. If you want to find a successful option you would do well if you did your homework well. You would also gain at lot by talking to concerned local, county and state governments on this.
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