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| Understanding the Land Loan |
In a real estate broker business, almost every thing revolves
around land. Obviously it is hard to run a business centered
around land without knowing where to acquire prime land and how
to finance the land. Let's take some time to familiarize
ourselves with some of the key terms that drive the real estate
broker industry. A good broker business often times will acquire
land through land auctions and then finance these acquisitions
with a land loan or a land contract.
To learn how this all fits together lets suppose you are
interested in investing in some real estate and developing your
own little broker business to generate some extra income. Before
you can really do anything in your business, you must first
acquire some real estate. Now you might sift through the local
papers and real estate guides looking for that ideal piece that
fits all your requirements. This method could take quite |
some
time as it is hard to come by really good deals in this manner.
On the other hand, perhaps a friend mentioned in passing how he
built his first house on a piece of property he purchased at a
land auction and got a great deal on. Your friend may be on to
something here. Have you ever thought about checking out a land
auction?
If you have not been to a land auction now is the time to go check one out in
your area. Thanks to the great format of auctions, the land you
are bidding on will start at a relatively low bid price and the
land auction will proceed just like a normal auction. Often
there will not be much competition for land and you will be able
to purchase a great piece of land from the land auction.
After you have got your piece of property from the land auction
you must find a way to finance it. This is where the land loan
comes in. A land loan is exactly what it sounds |
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like - a loan
for a piece of land. The land loan will be secured by the real estate that
it pays for and you will be able to get a loan for the amount of
the sale price of the real estate property. Your lender will
likely dictate some terms as to what can be done with the land
to ensure the value of the land remains intact and the land loan
balance can be paid off. If you are into rentals then you might
consider building a house or two on this property, depending on
the size of the property you won in the land auction.
Once your land loan is secure and you have built the houses and
landscaped the property then your energies must turn to making
this acquisition profitable to you. Hopefully you have added
value to the land and can sell the property at a profit. This
will create a nice little return on the project and allow you to
focus your efforts on the next project.
On the other |
hand you might consider exiting the property by
selling the land and closing on a land contract with the buyer.
A land contract insinuates that you are essentially financing
the purchase for the buyer. Thus, when a buyer signs a land
contract he is agreeing to submit monthly payments to you
directly at the agreed upon terms. In turn you will pocket some
of the money and turn the rest over to the bank that issued you
the land loan. By using a land contract you can help somebody
who has bad credit purchase the land and charge them a premium
on that agreement so that you are making money on top of money.
That is to say you are making interest on top of the net profit
you got with the sale of the property.
Adam Smith is an internet marketer for 10X
Marketing. You can learn more about the real estate market and
depreciation from OneMinuteMillionaire.com
About the author:
None
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