How To Purchase Land Without A Lot Of Money - Part 2

Is there a way to finance raw or undeveloped land if I have only a small amount of cash?

The short answer is YES! There is a way to do this but you need to understand that not every Seller is willing to take a small amount down and carry the rest on a note.  

Factors that Need To Be Considered

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

  1. 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 and 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.
  2. 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.
  3. 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.
  4. The best land deals are usually land that is for sale by owner (FSBO).

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

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 $10,000.00 and terms are 30% down and 60 payments (5 years) of $138.68 that equals an interest rate of 7%.

You only have $1,000.00 for a down payment, how might you make a workable deal? See if the owner is agreeable to a little creative financing.

Offer $1,000.00 as down payment and payments of $138.68 for 7 years instead of 5 years. If the land owner accepts this deal you have bought the land for a down payment you can afford and you can start developing your small homestead! Remember the old adage: Time is money! That is true for both buyer and seller.

Here is how the figures compare:

Owner's proposed deal; would result in a total of $11,320.80 in total payments for the land. ($3,000.00 down and $8,320.80 in payments = $11,320.80). But you could not afford $3,000.00 down payment.

Your offer Owner Accepted; results in a total of $12,649.12 in total payments for the land. ($1,000.00 down and $11,649.12 in payments = $12,649.12) The land did cost you more, but that is not the only way to look at this situation!

In This Case Both Parties Won Something

In your creative financing offer, the owner received an additional $1,328.32 for the land, a benefit to him.

You received benefits also! 1) You got the land for the down payment you could afford, 2) Even though it took 24 more months to pay for the land, the extra you paid only equaled about 9 1/2 extra monthly payments yet you were able to stretch the payments out over 24 more months. 3) You were able to buy the land when you could not buy it on the owner's initial terms.

You created a win-win situation for the owner and for you! You won by getting the land now on terms you could afford. The owner 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.

In How To Purchase Land Without A Lot Of Money - Part 3 we'll look at how to protect both the land owner and you, the buyer, after the sale is made but before the land is paid off!

About The Author

John Brownlee

A retired Lawyer and Health Care Provider, he teaches people how to locate, evaluate, and purchase Country and Homestead Property. He and his wife, Linda, have taught hundreds of people how to suture wounds in an emergency. He teaches both Preparedness and Health Care Classes and has been a Presenter at Sustainable Preparedness Expos. He holds a General Ham Radio Operator's License.