Seller Financed Land in General

Traditionally, real estate is purchased with traditional bank financing. A bank lends you money to pay for a property (almost always one with an existing home, or one well on its way to being built), and then you make payments for a period of usually 30 years. The theory, or at least the hope, is that the home's value will go up, and you can either refinance or sell at a profit, perhaps trading up to a bigger house.

Now, here's a question for you. Looking to the future, does it seem like the current system is going to work for you?

The average cost of a home in the United States is close to a quarter-million dollars. If you don't have a quarter million in your bank account, you'll need a mortgage. When you're a first-time buyer, you'll need at least a 3.5-5% down payment to qualify for a mortgage in the best of circumstances. Often, you'll need 20% to secure a loan without needing to carry mortgage insurance.

Do the math! The costs mount. Not everyone is a good fit for this scenario. Maybe you are excited by the idea of homesteading. Living off the land is your life's goal, and buying undeveloped land can make your dream a reality.

Do you trust enough in the traditional system that you believe taking out a mortgage will work for you over the next several decades? How about the next decade?

In the emerging '20s, we can expect continued social and economic impacts from the COVID-19 pandemic. Political turmoil has created uncertainties about urban and suburban areas and their ability to thrive, not to mention the vast array of tax and spending proposals being contemplated at all government levels. Ideas that once would have received a consensus raspberry now seem poised to become a part of our economic structure.

The fallout across the real economy of goods and services transacted between individuals and businesses could take most of the decade to rebound to anything resembling a 'strong economy.

So what does that mean for someone who wants to buy a house? The answer is less job and income stability. In the past, one could rely on their job or career for most of their working life. They could count on working their way up the company ladder over the years until retirement with a retirement package and possibly stock options plus a healthy 401k. These days this American dream is all but dead. These days one must be more resourceful and self reliant.

Since the end of the Second World War until the Great Recession, the engine that drove the real estate market was employment stability. Even as, in the 1990s, the era of working for a single company for an entire career gave way to moving between several companies throughout a career, income expectations remained consistent.

Simply stated, one could expect enough stability to pay off a mortgage reliably.

Is that the way it will continue to be? Is that the way it's been since the Great Recession?

The answer is too complicated for this book, but the nut of it is that the nature of work and buying property must change, or we become a society of renters. What that change looks like, no one quite knows yet.

But what we do know is new ways of doing things always emerge, and sometimes those new ways aren't that old but have been lurking in the shadows waiting for their chance to become a market force.

New ways breed new ways, so to speak.

Buying land is a big undertaking, and before you start the process, you need to figure out your budget for your new home. If you want to control the building of your own dream home, consider buying a plot of land. You may also want to buy an empty lot next to your home to expand your yard or lot for future commercial purposes.

And there exists a way to do this TODAY, without going through the traditional mortgage finance system.

Buying seller financed land is one of the emerging ways of buy property for a very low down payment, usually a couple of hundred dollars.

Seller financing is exactly what it sounds like. The owner finances the property themselves through a purchase agreement that specifies clear terms. It's a lot easier to understand than a mortgage contract. The seller agrees to accept installments from the buyer in exchange for them obtaining a loan through the bank, usually in the form of an installment loan.

This way of buying property isn't for everyone. You need to be something of a self-starter, driven by a sense of independence. Many of our buyers take this route because of the opportunity to build their own home and live their desired lifestyle.

Others chose to have their home constructed similarly to the days when buyers hired architects and contractors. They may choose to finance the building of their home or pay out of pocket.

How you develop your land is up to you as long as it's done within local ordinances requirements. Always obtain the necessary permits. Restrictions are typically light and have mostly to do with how far the property sits from the road, standards for cabling and utility equipment, and managing runoff—things like that.

So what do you do next?
If you haven't been scared away by the idea of developing your property, read on. In the coming chapters, we'll have lots more details that will likely answer most of your questions. Feel free to reach out anytime for more answers.