Purchase Land Without A Lot Of Money⎜Owner Financing Guide

purchasing land

In spite of the prevailing opinion that you need a lot of money to purchase land there are ways people who do not have a lot of money purchase land!

I am frequently asked how can land be purchased when you do not have a lot of money.

Can I purchase land without a lot of money?

Yes, you need to be willing to spend time looking on your own, you need to understand owner financing and you need to know what to avoid and what type of owner financing is safe to accept.

The process is different than the usual way of looking for and purchasing land.

Let’s see what is involved.

Are You Willing To Spend Time Looking For Rural Land?

If you don’t have a lot of money to spend on land, don’t waste time going to a Realtor and asking if they have any cheap land.

I know someone who did just that.

The Realtor told him that if he did not have at least $150,000 to spend on land he was out of luck!

If you are cash poor but are determined to have a place of your own, it is still possible if you are willing to look for just the right situation.

A good place to start is to look in the smaller free sales papers for your county and the surrounding counties.

Another source is to look on Craigslist.com for the surrounding area.

You are looking for For Sale By Owner (FSBO) ads that say the owner is willing to finance the land.

A typical ad might say something like “Owner will accept a down payment and carry-back a note for the balance.”

If an amount of down payment is listed, don’t let it discourage you if it is more than you have.

When push comes to shove some owners will lower the down payment requirements and accept a longer payment term.

Not every owner will do this, but there are some who will.

This method works best on small acreage, say 2 to 3 acres that has been for sale by the owner for some time.

You will need to call the owner and make an appointment to see the land.

After looking at it, if it is suitable land, be honest with the owner about your financial situation.

Are You Willing To Live On Small Acreage?

You want land that has a relatively flat area large enough for a house and perhaps a garden.

A small area of woods is nice and this can be on ground that is not level.

With careful planning a level acre or so can be enough space for a house, septic system, well and garden.

If there was an acre and a half that was fairly level, you would have room to add a larger garden.

Carefully cultivated and laid out, a 100′ x 100′ garden can produce a large amount of food.

Some berry bushes or dwarf fruit trees could be planted along the edge of the woods if the woods do not shade them.

Be sure there are no restrictions for building on small acreage in the area where you are looking for land.

Check with the County Building Commissioner or County Zoning Board to see if there are restrictions in the part of the county where you are looking at land.

Usually the lowest priced land is undeveloped rural land that has to be cleared to be useful.

Many times this type of land is For Sale By Owner (FSBO).

Any trees that have to be cut can be cut up into lengths for burning in a wood stove and stacked out of the way until needed.

In the mountains and in northern snow country there are usually U.S. or State forests.

It is possible to get a permit for a very reasonable cost allowing you to harvest firewood from State or Federal land.

Harvesting firewood this way allows you to get by on a smaller parcel of land than if you had to have your own woodlot for firewood to heat your home in the winter.

One person I know was able to put the cost of an acre of land on his credit card.

And was willing to carry water from a spring about a mile away until he had paid off the credit card and had saved money for a well.

Do You Have The Skills To Build A Dwelling?

I have met people who were determined to live in the country but had never built a house or cabin before.

Their solution was to go to the nearest Goodwill Store or other secondhand store that sells used books.

By doing a little searching they found books on framing, plumbing, and electrical for references when building their home.

For less than $10.00 they purchased books by companies like “Time Life” that taught them how to do construction framing, foundations, plumbing, and electrical .

Following the instructions in these books they built small homes themselves.

Check with the county building inspector to see what permits are needed.

Temporary housing while building a dwelling could be a travel trailer.

Or an older mobile home that could be purchased for very little money and moved to the property.

What Is Your Current Living Situation?

If you are currently renting in or near the city, a careful search may turn up rental property in the country for less money.

A portion of the money saved by renting in the country could go toward the purchase of land.

Not long ago a friend was looking for land.

He did a web based search instead of going to a Realtor.

He found, among other properties; 5 acres with a 300 square foot cabin that was livable while building something else for an asking price of $35,000.

This property was a FSBO and the owner did not live there.

He also found 6 acres with a 744 square foot cabin that had a creek running across it for $49,900.

There was no one living on this property either.

These are examples of property that may be purchased for a small down payment with owner carry-back financing.

You may be able to negotiate a fairly reasonable reduction in sales price if the property has a dwelling on it that is livable but has been vacant for a year or more.

Can I Find Land That An Owner Will Finance?

If you are determined to move to the country but do not have a lot of money it may take time to locate property owner financed land.

Check with the County Zoning Board to see if the land is zoned residential/agricultural.

To find out if the taxes have been paid, check with the County Tax Assessor’s office.

Get a written contract to buy the land and have the contract recorded in the county office where deeds are recorded.

This is for your protection.

With persistence you will find a Seller willing to take a small amount down and carry the rest on a note.

Finding a Seller willing to take a small amount down and financing the rest depends on the following factors:

  • Is the current Real Estate Market a Buyer’s Market or a Seller’s Market?

In a Buyer’s Market there is a lot of raw land for sale and it takes a long time, 6 months or more, for a parcel of land to sell.

In a Seller’s Market there is not a lot of raw land for sale.

It sells quickly and for or very close to the asking price.

The chances of finding a Seller who will take a small down payment and finance the rest is higher in a Buyer’s Market.

  • Where is the land located?

Land near a town and on a blacktop road is usually easier to sell and sells for near the asking price.

Land on a gravel road, especially if the road is not County Maintained, is usually further away from town and sells at a much lower price.

It is also easier to negotiate a price reduction on land further away from town and on a private road that is not County Maintained.

  • What is the land like?

Flat land is worth more than sloping land.

Land that needs to be cleared is usually worth less than land already cleared.

  • The best land deals are usually FSBOs.

Negotiating With The Owner

Your goal is to be courteous and honest with the owner and work out an arrangement that can be beneficial to the land owner and to you.

If the owner is asking more down payment than you can afford, try offering what you can afford as a down payment and extending the length of the payments.

Here is an example of negotiating…

The property is two and a half acres of reasonably level land covered with trees and underbrush on a private gravel road a half mile from a County Maintained Road.

And 30 minutes from the nearest town.

Asking price is $10,000 with 30% down and 60 payments (5 years) of $138.68 that equals an interest rate of 7%.

The problem is the Buyer only has $1,000 for a down payment.

How might the Buyer make a workable deal?

The solution is to see if the owner is agreeable to a little creative financing.

The buyer could offer $1,000 as down payment and payments of $138.68 for 7 years instead of 5 years.

If the land owner accepts this deal the land has been purchased for a down payment the Buyer can afford.

Now the Buyer can start developing a small homestead!

Here is how the figures compare…

Owner’s proposed deal would result in a total of $11,320.80 paid for the land.

$3,000 down and $8,320.80 in payments = $11,320.80.

But the Buyer could not afford $3,000 down payment.

By accepting the Buyer’s offer, the Owner receives a total of $12,649.12 for the land.

$1,000 down and $11,649.12 in payments = $12,649.12.

The land did cost the Buyer more money in the long run, but that is not the only way to look at this situation!

Remember the old adage.

Time is money!

That is true for both buyer and seller.

In This Case Both Parties Won Something

With the Buyer’s creative financing offer, the owner received an additional $1,328.32 for the land.

A benefit to him.

The Buyer received benefits also!

  • Buyer was able to pay a down payment he could afford.
  • It took 24 more months to pay for the land.

But the extra money paid only equaled about 9 1/2 extra monthly payments!

Like this…9.5 times $138.68 = $1,316.46 which is almost the extra payments of $1,328.32 paid for the land.

  • Buyer’s offer enabled the Buyer to purchase the land when he could not buy it on the owner’s initial terms.
  • Buyer created a win-win situation for both the Seller and himself!
  • Buyer won by getting the land on terms he could afford.
  • The Seller won by getting more rent for his money.

Rent is another way of looking at the interest paid.

Whether financed through a bank, mortgage company, credit union, or owner financed interest is the rent you pay for the use of the money financed.

How To Protect Both The Buyer And Seller While Payments Are Being Made

When you purchase land with a small down payment and the Seller carries back a note, (acts like a bank), you want to continue the win-win situation by having safeguards in place.

That benefit both the Seller and the Buyer.

Areas to consider in protecting both the Seller and Buyer:

  • Keeping accurate track of both principle and interest that has been paid.
  • Having proof of interest paid for Tax Returns.
  • Making sure that Property Taxes and Hazard Insurance payments are paid when due.
  • Knowing the remaining principle balance in the event of an early payoff of the loan.

Keeping Accurate Track Of Principle And Interest Paid

In most instances, when small acreage is purchased with a small down payment and the Seller (Owner) carries back a note, the Seller and Buyer are next door neighbors.

It is always a good policy to be on friendly terms with your next door neighbor.

Especially in the country where emergency services have a longer response time.

So the Buyer’s goal is to do everything possible to stay on very good neighborly terms with the Seller he is making payments too.

It is a simple fact of human nature that when money is involved, there can be the chance of disagreements.

The Buyer’s goal is to eliminate, if possible, every chance of disagreement.

The best way to accomplish this is to have a neutral third party who keeps records of each payment.

And breaks down each payment into the interest and principle paid.

And also keeps track of the remaining interest and principle due.

If you live where there is a Title Company or an Escrow Company this makes accomplishing these goals much easier.

Title and Escrow Companies have the capability of accepting the payments from the buyer.

And keeping records of the amount of interest and principle paid with each payment.

They do this for a small monthly fee which is usually added into the payment.

The Title or Escrow Company will deposit the Seller’s portion of the payment directly into the Seller’s bank account.

By using a title or Escrow Company there is a neutral, capable, professional and recognized company keeping financial records related to the purchase and sale of the property. 

Since a Title or Escrow Company would probably handle the legal paper work associated with the sale of the property and record the deed from the Seller to the Buyer it is easy to have them handle the monthly payments.

And to keep track of the principle and interest paid.

In a small down payment and owner-carry-back financing situation, it is usually the buyer who pays the few dollars a month fee that the Title or Escrow Company charges for this service.

Remember, the Seller did the Buyer a service by reducing the down payment.

And extending the payments over a longer period of time.

So the Buyer, as a way of saying thank you for helping me get country property is the one to pay the monthly fee for the record keeping.

If there is not a Title or Escrow Company in your area, the legal paperwork of the land sale will most likely be done in the office of a local County Attorney.

In many areas of the Country this local attorney’s office will be set up to handle the monthly payments and keep the records for a small monthly fee.

Having Proof Of Interest Paid For Tax Returns

Both Buyer and Seller will need proper documentation of payments made for Tax Returns.

The best way to avoid questions in an audit about interest and payments is to have a year ending statement of interest and principle paid on the loan from a Title or Escrow Company.

Or from a Law Office that has experience in accepting those payments and issuing statements for Income Tax purposes.

Making Sure Property Taxes And Hazard Insurance Payments Are Paid When Due

It is possible to have the Title or Escrow Company or the County Attorney’s Office pay property taxes and hazard insurance premiums.

This is done by adding 1/12 of the estimated property taxes and 1/12 of the estimated hazard insurance premiums to each payment made.

Authorize them to pay the property taxes and hazard insurance premiums when due.

And send both Buyer and Seller proof of payments made for their records.

Knowing The Remaining Interest And Principle Due

This is valuable if the owner-carry-back loan is set up with a clause that allows the loan to be paid off early with no prepayment penalty.

This type of a clause may not be in each owner-carry-back loan papers.

This is a point of negotiation between Buyer and Seller that should be handled carefully.  

Insisting on this type of a clause could be a deal breaker.

Once the owner is willing to take a small down payment and play the role of a bank, don’t push too hard for a clause with an early payoff and no prepayment penalty.

Be thankful the Seller is willing to lower the down payment and extend the payment terms.

If a no prepayment penalty clause is a deal breaker it could be a long time before finding another owner willing to sell small acreage for a small down payment and extended monthly terms.

Land Sale Contracts And Contracts For Deeds

In some areas owner financing is done with a document called a Land Sale Contract

Or a document called a Contract For Deed.

Both of these methods of owner financing of land are very dangerous for the Buyer!

With these methods there is no deed given the buyer until every payment is made.

When the buyer is not given a deed to the property the Buyer has no proof of an ownership interest in the land.

Without proof of an ownership interest in the land any disagreement with the Seller can result in the Buyer being removed from the land.

Without proof of an ownership interest in the land the Buyer is looked upon as a mere renter, not a Buyer!

If the Buyer is removed from land financed by a Land Sale Contract or a Contract For Deed the Buyer’s only remedy is to sue the Seller for a return of some of the payments made.

The Buyer can not sue for the land because he has no proof of any ownership interest in the land.

It is never a good idea to finance land under a Land Sale contract or a Contract for Deed.

It is best to avoid these forms of owner financing.

Related Questions

Do you need a down payment to buy land?

A down payment is usually required to buy land.

The reason is that a down payment is usually several times more than a monthly payment.

And gives the seller or lender the impression that you can really afford to buy the land.

Can you get 100% financing on land loans?

A land loan is a loan for financing raw (undeveloped) land.

The usual amount that can be obtained from a bank or mortgage company to purchase raw land is 50% of the land’s value.

Banks and mortgage companies are in the business of making secure loans.

A 100% loan on raw land does not meet the definition of secure so a bank or mortgage company will not loan 100% on raw land.

Do you still pay property tax after your house is paid off?


Property Tax is a County Tax that has nothing to do with whether or not you still owe money on your house or property.

Property tax is still owed.

And if you fall behind in paying it for three years the County can sell your house and property to get the back taxes owed to the County.

John Brownlee

John is a retired Lawyer, Health Care Provider and has a certificate in Pest Management Technology. He teaches people how to locate, evaluate, and purchase Country and Homestead Property. He and his wife, Linda, share their knowledge of homesteading skills and safe pest management.

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