By now we are all feeling the pain of inflation. Whether it is at the gas pump, grocery store, or purchasing home improvement supplies, it hits us everywhere. The rapid growth of inflation has caused for the Federal Reserve to hike up interest rates. Higher interest rates are bad for new home loans, credit cards, and business borrowing. However, the higher rates are good for individuals with money or assets to invest. A land contract is a beneficial tool for both buyers and sellers of real estate especially in a high interest rate environment.
Specifically, a land contract is a transfer of real estate that is considered seller financing. It is similar to a mortgage, but instead of having a bank or credit union lend money to the purchaser, the buyer, referred to as a Vendee in the document, makes payments to the seller, referred to as a Vendor in the document, until the contract is satisfied. Often in these arrangements, the seller wins due to a steady stream of income at a higher rate than they could get at a financial institution and potentially limits capital gains due to taking payments over time.* The buyer wins as well as they often get a lower interest rate than they would at a financial institution and they are able to purchase real estate in situations where they not able to get a traditional financing.
Keys for Seller
Keys for the Buyer
While not for everyone, a land contract presents an intriguing tool for real estate sellers to get solid investment returns, potentially save on taxes, and generally be in a very strong position in default.
Russell Law Offices, S.C. has experienced attorneys who can provide advice not only on land contracts but all types of real estate transactions. Reach out to Attorney Nathan Russell and his associates for assistance with your real estate transaction throughout Wisconsin.
*Always consult with your tax professional before entering into a land contract.