LandInvestors.com Forums **Ask A Question** Contract for deed payment plans

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    Bryan
    Participant
    Post count: 6

    Hey all,

    How do you guys usually structure your contract for deeds? For example, if I list a property for $15,000 cash what are some possible terms deals that you would do? Do you have any rules of thumb? A specific ‘interest rate’?

    Thanks everyone.

    Bryan

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  • Kevin Farrell
    Moderator
    Post count: 1645
    ProAdvanced

    Bryan – keep in mind that everything is negotiable – the down payment, the monthly payment, the total cost and number of months. The only thing that I really hold my ground on when negotiating is the down payment. I suggest you get at least $500 to $1000 down. On terms deals I usually make the total cost 1.5 X the cash price. I will tell the buyer I need $1000 down and $350 per month (the monthly payment is negotiable). Notice I have not mentioned the total cost. Why? Because most terms buyers don’t care. For your example of $15,000 I would need $1000 down and $350 per month for 62 months for total cost after all payments of $22,500. From there you can negotiate the monthly payment amount up or down a little. Once we agree on the terms I put it all in a contract with the actual payment terms spelled out like this:

    Payment Terms: $1000 down + $350 X 62 months = $22,500 after all payments are complete.

    On some properties that are more desireable, I try to get a down payment that is 50% of my purchase price.

    This is just one way to do this. Good luck.

    Kevin Farrell - Moderator
    Need more help?
    Schedule a 30 minute call - https://calendly.com/kevin-629

    Bryan
    Participant
    Post count: 6

    @kevinfarrell

    Thank you sir I appreciate your response.

    Will you shorten/lower the terms if they choose to put a down a larger downpayment? For example if they ask what the different terms are if they put down $5k vs $10k. Or will you just keep the final payment number the same with all scenarios and just adjust either the monthly payment amount or the length of the terms? Would you give them a discounted price if they ask to pay off the property midway through the contract?

    Thanks again.

    Kevin Farrell
    Moderator
    Post count: 1645
    ProAdvanced

    Bryan – Keep the math simple. No interest. Larger down payment means lower monthly payments or fewer months. Total cost would stay the same but is negotiable. Like I said, most never even mention the total cost. Why should I reduce it?

    Some terms buyers pay every time, on time. Treat them like gold. When they get near the end of the payments we always contact them and offer to waive the last one or two months. Or we may contact them and say “You still owe $1500. If you can pay us $750 now, we can call it paid off and get the deed recorded in your name.” Look for opportunities to reward them.

    I have done terms deals with a balloon payment after 12 months. The same lady bought two lots on separate contracts. She paid a large down payment and then wanted to pay $75 per month with a $16,000 balloon payment after 12 months. She paid like clockwork and I gave her a significant discount on the property.

    Most people know how much that have in their pocket right now (down payment) and how much they might be able to pay per month (monthly payment). Just work with that.

    Kevin Farrell - Moderator
    Need more help?
    Schedule a 30 minute call - https://calendly.com/kevin-629

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