Hi all, does anyone have experience purchasing performing promissory notes from land flippers (who hold land contracts)? I’m curious how these deals are typically structured. Does the note seller still manage the note and pass the proceeds to the buyer, or does the seller deed the property to the buyer who then manages the note after the purchase? What sort of pricing is typical for these purchases? I presume there is some discount given off the remaining principal due? If anyone is willing to share a sample contact, that would be great! Thanks, and happy new year!
@reklandco I know these are bought and sold on Paperstac. They can also be bought directly from another land investor if you have an existing relationship and you both trust each other.
I couldn’t say what the "normal’ discounted rate is, but it has a lot to do with the risk associated with the deal and how well things were documented when the loan was first closed (proper loan documents, everything recorded properly, all payments tracked, background and credit checks on the borrowers, etc).
A lot of land flippers do a horrible job of documenting this stuff (at least, when compared to the conventional banking industry) because most land flipping educators don’t explain anything about how to do this correctly… so, unless you can buy them from very reputable land investor (not just someone who does a lot of deals, but someone who really has their seller financing game buttoned up), I would press for a pretty big discount on any loans if I were to buy them out, even if they’re performing.
You might find some insights from these two podcast episodes:
https://retipster.com/078-justin-bogard/
https://retipster.com/088-brett-burky-paperstac/
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@reklandco Echoing @retipsterseth. Buyer beware! There is almost no regulatory oversight in non owner occupied land notes. I buy notes of all sorts. I see (and have bought many) zero interest $99 down $99/month land contracts. Buyer is leasing the land until paid for, so you still have liability. I also buy (and sell occasionally) 10/10/10 single family house contracts that have credit and income verification. 10% down, 10% interest 10 year term (as a generality) is the gold standard. Guess which has more value? There’s a risk adjusted price for everything.