While the terms land contract and land trust sound similar, they mean two completely different things. One of the main differences is how each of these agreements are used — and as a real estate investor, it’s in your best interest to know what sets them apart.
What is a Land Contract?
A land contract, which is also called a contract for deed or an installment land contract, is a financing tool that lets the seller and buyer agree upon a property’s sale using installment payments.
Some REIs choose to sell their investment properties under land contract.
If you choose to sell a property under land contract, you’re not the landlord of the property. The buyer will pay you monthly payments toward the total balance of the house’s value. In some cases, buyers pay down on the home while improving their credit scores enough to qualify for a conventional mortgage; at that point, you — the seller — will get a lump sum payment from the buyer’s lending institution.
What is a Land Trust?
A land trust is a revocable, living trust that many people use for privacy. It has nothing to do with the way land is bought and sold, but it can complement a land contract transaction to ensure privacy and discretion.
Do You Need a Lawyer for a Land Contract or Land Trust?
It’s nearly always a good idea to involve an attorney when you’re drawing up legally binding contracts. The laws surrounding real estate transactions can become complicated, so it’s important to have a talented lawyer on your real estate investing team.
Are You Looking for Financing for an Investment Property in Atlanta?
If you’re an investor who needs a hard money loan in or around Atlanta, we may be able to help you. Check out our loan criteria to find out whether this type of financing is right for you, and be sure to explore our hard money loan FAQs.
You can apply for a hard money loan online or you can contact us at 404-814-1644.