Yesterday was a good day. No, make that a wonderful day. My tenant Jesus and his lovely family gave me the last payment on their house. They are now homeowners. To give you a little background, they first rented from me in 1996, shortly after the birth of their first child. I was thrilled with their tenancy . . . clean people, excellent payers . . . a landlord’s dream. They returned to Mexico after renting from me for a couple of years. In 2000, I received a call from Texas. They were on their way back to Indianapolis and had saved my number, and were wondering if I could accommodate them, now a family of four. I happily put them in one of my duplexes.
In 2003, Jesus asked about the possibility of buying the house from me. His sister lived in the back apartment and they were very happy there. I sold them the house on land contract. He gave me $7000 down (in $100 bills!) and we set up the payment schedule, at 9% interest. For people who have marginal credit or no credit (like Jesus) this is an excellent way to purchase a home. He’s never been late on a payment and has improved the home in many ways. Here are a couple before/after exterior pictures:
The interior changes are more dramatic; as his family grew to three children, Jesus made the attic into additional living space and added another bathroom. It looks professional.
I explain the ins and outs of land contracts in detail in my book, The Landlord Chronicles: Investing in Low and Middle Income Rentals:
“The major advantages to land contracts are the following:
- I don’t have to claim all the profit in the year I sell the property; it’s spread out over the life of the loan (check this out with your tax advisor)
- I have no responsibility for repairs or bill-paying at the property
- The buyers are invested in it financially and emotionally, therefore motivated to take good care of it
- Being the bank enables me to make more money on the sale, through principal and interest, than I would by selling outright
- Land contracts provide long-term income, with little work involved
I’ve had people in tears after being given the keys to their homes. These are people who never dreamed they’d be able to own a home. Although land contracts are a great moneymaker for me, providing these dream homes for my buyers makes me feel part of something wonderful…for these families, the neighborhood and the city as well. I love it.”
(If you’d like to check out more of my book or purchase a copy, you may go to www.authorhouse.com and click or their book store, or you may contact me personally at firstname.lastname@example.org.) Re: land contracts, with HERA and the Safe Act (see “Is the Party Over?”) my ability to do these without a mortgage loan officer’s license may be restricted. The jury is still out . . . everything depends on the interpretation of the law. I’ll keep you posted . . .