Buying land on terms with the intent to sell

When funds for land flipping are in short supply, how feasible is buying land on terms with owner financing and reselling the property? In other words, if I found a parcel on Craigslist or Facebook Marketplace that’s offered with terms and I feel I can turn a profit but I don’t have enough funds available to pay cash, does it ever make sense to finance the property while looking for a buyer? I’ve seen this type of deal mentioned without any explanation of how it works in practice. Or would I be better off looking for contract assignment opportunities instead? Thanks.

@landoffer that’s a great question. I think you’ll appreciate the podcast episode that’s getting published tomorrow with Eddie Speed. This is exactly what he does and we talked about this strategy quite a bit in our conversation with him. When it gets published, you’ll be able to find it here on YouTube:

To be honest, I never saw much opportunity with this strategy in the vacant land space UNTIL I heard what he had to say about it.

There is a lot that can be done if you understand how to structure an acquisition with seller financing (and more importantly, how to explain it to the seller so they’ll actually accept the offer).

I think there are at least a few key components to making this work…

  • Only do this with Class A vacant lots (the kinds that are highly desirable, valuable, and easy to sell).
  • Make sure you’re underwriting your borrower appropriately, don’t just approve them blindly. You want to be confident they’ll pay as agreed.
  • Make sure you’re paying a low amount of interest (or a low price, preferably, both) and selling at a much higher rate of interest (or higher price, preferably both). That way, you can make money on both the price margin and the interest spread.

On the buy side, you’ll also want to make sure the loan documents are written with the right provisions that are in your favor and give you the flexibility you’ll need, but that’s another big conversation.

I think there is certainly an opportunity here, but it’s also a strategy that requires a lot more “stuff” than just buying and selling for cash. It’s an area of specialty that most land investors don’t deal with… which means you’ll find a lot less competition here, but there’s also a lot more learning and details you’ll have to pay attention to.

I’m hoping to learn more about it in the months to come.


@retipsterseth, thank you for your response. I was able to listen yesterday to the podcast and as a beginner I’ll admit I had to stop and replay a few sections to wrap my head around how Mr. Speed uses seller financing in his land deals. As you wrote in your response, his approach is very much a specialty, one he took many years to perfect with I would assume much trial and error.

As he points out with his car dealer financing department analogy, he’s more in the banking business than the land business in some respect. He did say I recall the land deal becomes the vehicle by which he’s able to make a lot of his profit on the financing side. This is by no means land flipping 101. I’m still very much in the keep it simple mode in my land investing adventure.

Staying with the basics, my motivation in asking about buying on terms with the intent to sell was less clever perhaps. At any point in the buy-sell process of standard land flipping there are times when the typical land investor finds him or herself low on funds. Could the investor then turn to buying on terms or would contract assignments make more sense (I’m intentionally leaving out the option of seeking a money partner)?

Now that I’ve had more time to think this through I guess the problem with buying on terms and flipping would be not having the funds to close the deal on the buy side when I go to sell. Unless I’m able to forestall the need to possess the deed by selling on terms. Now that’s getting a bit more clever and closer to Eddie Speed’s model. Or as I asked in my original post, are contract assignments the way to go when funds for acquisition get low? Thanks again.

@landoffer yeah, I hear you. Even I had to listen to it twice to grasp most of it. Going down this path is not keeping it simple, but if you’re willing to figure it out, it can open a lot of doors for you.

As for doing this vs. assignments, I think the assignment path is much simpler and advantageous because you’re not committing yourself to a payment plan or buying the property outright at some future date.

There may be some people and properties that simply won’t go along with the assignment strategy, but they would go along with the seller financing option (and keep in mind, both are unconventional… so it seems uncommon that a seller would jump at seller financing but not an assignable purchase agreement). In those rare cases, it may be nice to understand how to pursue this takedown strategy, but as we both said, it’s not the simplest “beginner” strategy in the book, and it requires a lot more knowledge and knowledge experience to handle this like a pro.

@landoffer I actually had a seller offer to sell to me on terms a couple of years ago. I had not even considered that approach until she suggested it.

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I listened to the podcast with Eddie Speed and found it interesting to see how he was able to convert sellers into actually selling using terms, when otherwise they may have said no to a lower offer. But what confuses me, is if you’re paying a seller more than what you would have paid in cash over a period of months or years, depending on the property, etc., it seems as if this would be a larger risk in the profitability standpoint on our side when it comes to reselling.

Granted, we could charge more interest than what we were paying, and obviously ask more on the total sale, but not knowing the future for anything, makes this more of a gamble we’d better be sure of, don’t you think?

I just think it’s a great way to ease the seller’s mind that they’ll get more, but will we in the end?

@landoffer Lawrence, At this point you’re probably just better off partnering with another land investor that is willing to post up the cash on your deal rather than diving into more complex strategies like this.

@probb I will need to listen again to what he said in the podcast. It’s been a couple weeks since hearing it and I don’t recall what he said pertaining to repaying the loan to the original seller.

But how I thought of this working, when I originally posted the question, was that upon reselling the property I would pay off the loan from the original seller. That way I would only pay interest for the period of time it took me to resell the land. Does that make sense?

Now I’m a complete newbie on this, which is why I asked the question. I’m assuming with no repayment penalties, which is standard terms on such a loan, that’s how it should work. So in other words, if I purchase a property for $10,000 with say 5 year terms and resell it 6 months later and repay the loan, I’m assuming I’ll only pay interest on $10K for 6 months, a small fraction of the total interest on a 5 year loan. But I’m neither a real estate expert or a loan expert, so I’ll defer to those in the forum with more knowledge on this.

@push4ward I was asking about buying on terms and flipping land as someone who has little or no track record in land investing. I’ve heard this approach mentioned while researching land flipping but had never run across an explanation of how it works in practice. I should also reiterate I meant this as a potential solution when one is low on funds.

When starting a land investing business it’s feasible one might be both low on funds and lack a track record. If I had a trusting and supportive friend or family member willing to front me the funds, I agree that would be a lot simpler. Thanks.

@probb I went back and listened to the podcast with Eddie Speed and he does make reference to what he calls “temporary seller financing”. He uses that term several times, so you may need to listen to more to understand the context of what he’e saying. But one place he says this is here (the link is cued to the spot) -

He doesn’t go into much detail, but it seems apparent he’s buying properties in certain cases where he uses term financing to lower his upfront cost, resells the land and I assume turns around and pays the full balance on the loan to the original seller. By making the loan “temporary” he only pays a small fraction of the interest he would have paid had he made payments for the full loan term.

He’s good but he’s a bit hard to follow because of all the angles he’s looking at when he does a deal (he phrase three dimensional chess comes to mind). When he’s talking about using temporary seller financing as a “convenience”, I would at this point be using it as a necessity when I lack the funds to purchase the property.

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The spot in the video where he talks about “temporary seller financing” is at 26 minutes. When I inserted the video link it did not take the cue point.