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Trends in cash vs. terms.2018-04-23T11:07:00+00:00

LandInvestors.com Forums **Ask A Question** Trends in cash vs. terms.

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  • Scott Harper
    Participant
    Post count: 3

    Hi all. Officially, I’m new here,though I’ve been funding deals for a friend for a while. After seeing the system work, I have joined for myself.

    My friend who I’ve been helping, has done a bunch of deals on terms. However, I’ve noticed that a large portion of them back out eventually. He’s selling these properties at 3-4x purchase price, but he often has to start over.

    In listening to the podcast and reading posts here, it seems (though not clear) that most are shying away from terms and doing cash deals. In my mind, I’d rather sell a property for 2x cash than 4x terms just to be done with it and get the $ velocity going.

    What do most of you do? If you are shying away from terms, what is your most common method of payment?

    Thanks

    Kevin Farrell
    Moderator
    Post count: 753

    Hi Scott, Glad that you have joined us here. To each his own. There are many people who sell on terms and do very well. I think that they expect to sell some properties multiple times and that is just part of their business strategy. In fact, I sell land to terms people sometimes. It’s good business. I do not prefer terms deals. I will do them if I have trouble selling some properties, but I make sure that I get a good down payment. That tends to make people stick around and make the payments.

    Do the math. You can make a lot of money and build incredible cash flow per month by doing terms deals. Good luck.

    Kevin

    Stephen
    Participant
    Post count: 6

    Hi Scott, It depends on your priorities and goals. I prefer the cash sale business with larger/fewer deals as its less hassle and the model works for me. I also am relatively new so my priorities are to build a cash reserve and develop a business. At some point my strategy might be to load up on terms properties to get a cash flow business going, but starting out if you’re trying to live off income from land investing its harder to sell on terms as your money is tied up. In my opinion the terms deal model works best when people back out of the contracts so you can resell it. Also welcome!

    Chuck Lidtka
    Participant
    Post count: 115

    Hi Scott, I agree with Kevin 100%. I target to sell all my properties primarily as cash deals and only offer terms on the ones that are more difficult to sell. And when I do terms deals I don’t set people up to fail. I charge a decent down payment to help determine if they have the means and some discipline to make it work for the duration for both of us. I also don’t gouge my buyers on the terms price with a crazy high mark-up but one that I believe is reasonable, yet provides a great return on investment over time.

    I’ve done close to a dozen terms deals over the past year or so and have only had one to re-sell so far which was my very first deal. And that one was my fault since I was too eager to get that first deal done. I remember sensing the buyer would really have to scrape to make the monthly payments. Other than that, so far so good. You’ll have to weigh the trade-off of using your precious time and money by either funding and managing the monthly notes, or simply multiplying and growing your cash reserves over and over again.

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