When we pay taxes, a huge chunk of money came out of our accounts a twice a year. Real Estate Properties in Noida and Greater Noida, We did not escrow the amount. We decided to turn things around. We wanted to put this responsibility back on the tenant. It was clear that the best way to do this was with the real estate land contract. We jumped on the idea of land contracts. Then we reached a point where we had virtually everybody going in on a land contracts. A couple issues pop up with land contracts.
It was a good thing to have the client picking up on the taxes and insurance on this property. But it was harder in our city to get folks out of the property on a land contract than it is on a real estate rent-to-own or lease option. Real Estate Properties in Noida and Greater Noida, In fact, it’s double the time. It was a great learning experience for me and I can pass this along to you. Please research the rules and regulations in you state, town, county or neighborhood. These rules may not work in your favor.
The big thing here is for you to decide which exit strategy is right for you. You might find out that you want to do both land contracts and lease options. You will need to think of the positives and the negatives that come along with both when you start flipping houses for profit. Right now my organization would still entertain a land contract, but the customer will have to put down a much larger down payment. Property in Greater Noida | Property in Noida | Property in Ghaziabad | Property in Delhi NCR.
On a land contract, if they start getting funny with the payments, there’s additional criteria in there that makes it harder for us to drop them and move on. It gives them more leverage than we have in the arrangement. So the advantage of the taxes and insurance on a land contract is nice, because you shift the burden over to them, but by doing that, you take on additional problems. Keep that in mind when you are making your decision.
We try to get them steered towards the company that handles the insurance for us. Real Estate Properties in Noida and Greater Noida, That brings the advantage of speed; our company knows the property already. All the insurance company has to do is work with the buyer to be get them qualified for the insurance and go through the other paper work. We also want to make sure that you are listed as the mortgagors. This way, if they do not pay, you will be notified from the insurance company. The worst thing you can have happen is that they do not pay their insurance and you are not notified. You are thinking that your house is covered and it is not. Make sure you are listed on that insurance policy so that you are notified.
The taxes are going to come to the tenant. You need to have them notify you about their status with taxes. Real Estate Properties in Noida and Greater Noida, You have to check to make sure that the taxes are paid. You definitely don’t want to have their taxes become something that comes back and bites you! On land contracts, you see 20 to 30 years on amortizing. You are probably wondering why it is always 30 years. You have got three different things that you can turn and twist to make things come out the way you want them to. One is the time frame, what you amortize the loan over, on a land contract. The second thing is the interest rate. The third item is the monthly payment.
Obviously I want to make sure that that monthly payment is not less than what I am paying my private lender. So I want to make sure that the monthly payment is equal to or more than what I am paying out. Then I come back and can start adjusting the other two. I ask myself, “do I want to take the interest rate up or, or the number of years, and if we can squeeze down the number of years on this, then it takes that number up on the monthly payment, does not it?”
It’s the same thing with the interest rate. Real Estate Properties in Noida and Greater Noida, So we have to do this little juggling act on figuring out which one of those three knobs makes the most sense for our business to turn. You want them to have the incentive to come back later on and refinance it. This way you get cashed out. If the bottom line with you is the same as what they get at the bank, they really have no incentive to ever cash you out. So make sure there is a premium. This way you are protected and you are guiding them in the direction you want them to go.
