Selling Your Land With Owner Financing
If you owner financed a $200,000 property at 10% interest, you'd collect $1,579.63 a month and could earn up to $388,666 in interest on top of the price. Here's how it works.
If you owner financed a $200,000 property
- $20,000 down at closing
- 10% interest charged on the rest
- $1,579.63 to you every month
You'd earn up to $388,666 in interest, on top of the $200,000 price. Over the full 30 years, you'd collect $588,666 in total. With a 10-year balloon, $373,244. This is an example, not a quote. The tables below show how it works.
Talk through owner financing on my land
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Your buyer is ready. The bank isn't.
You've got land worth selling, and people want it. They call on the sign. They walk the fence line. Then they go to the bank and the deal stops.
Banks treat bare land as a risky loan. Most want 15 to 20% down, and the better rate only goes to buyers with strong credit. Government programs help some buyers, but an appraiser can still ask for a driveway or a well before the loan closes, and a well can run $30,000. Most land buyers out here have 10% saved, not 20%.
So the land sits, even though the buyer is real and the price is fair. Selling land with owner financing closes that gap. You carry the note yourself, the way Texas land has changed hands for generations.
How owner financing works
With owner financing, you are the bank.
- The buyer pays you a down payment at closing. In the examples here, that's 10% of the price.
- You and the buyer sign a note. It sets the interest rate, the monthly payment, and when the loan is paid off.
- The land secures the note. The buyer gets the deed at closing, and the note is recorded against the property. If the buyer stops paying, the land is how you get made whole.
- The buyer pays you every month. Part of each payment is interest, which is yours to keep. Part pays down what they owe.
- The balance gets paid off. Either over the full term, or all at once on a date you agree to, called a balloon.
Your attorney or title company writes the note and the documents that secure it.
What it pays you
These examples use 10% down, 10% interest, and payments figured over 30 years. If 30 years is longer than you want to wait, the remaining balance can come due in one payment at year 10 or year 20 instead. These are examples, not quotes. Your price and terms are yours to set.
A $100,000 tract: $10,000 down, 10% interest, $789.81 a month to you
| Paid off at | Interest you earn | Balloon due | Total you collect |
|---|---|---|---|
| 10 years | $86,622 | $81,844 | $186,622 |
| 20 years | $159,322 | $59,766 | $259,322 |
| 30 years (full term) | $194,333 | none | $294,333 |
A $200,000 property: $20,000 down, 10% interest, $1,579.63 a month to you
| Paid off at | Interest you earn | Balloon due | Total you collect |
|---|---|---|---|
| 10 years | $173,244 | $163,688 | $373,244 |
| 20 years | $318,643 | $119,532 | $518,643 |
| 30 years (full term) | $388,666 | none | $588,666 |
A $400,000 ranch: $40,000 down, 10% interest, $3,159.26 a month to you
| Paid off at | Interest you earn | Balloon due | Total you collect |
|---|---|---|---|
| 10 years | $346,488 | $327,377 | $746,488 |
| 20 years | $637,287 | $239,065 | $1,037,287 |
| 30 years (full term) | $777,333 | none | $1,177,333 |
"Total you collect" adds up the down payment, every monthly payment and the balloon. It assumes the buyer pays every month and pays the balloon when it's due, usually by refinancing with a bank. Many buyers pay off early, which means less total interest and your money sooner. Nobody can promise a buyer will stay the full term.
What can go wrong, and how it's handled
The buyer stops paying. You'd have to foreclose, which takes time and has costs, and you'd get the land back instead of the money. A real down payment helps, and so does checking the buyer's income, credit and plans before you agree.
Your cash comes over years, not at closing. If you need most of the money now, a short balloon or a regular sale may fit better.
Lending rules apply in some cases. If the buyer plans to put a home on the land and live there, federal and Texas lending rules can limit balloon payments and require a licensed loan originator. Your attorney decides which rules apply, before anything is signed.
Taxes are different. Spreading a sale over years can change how and when you pay tax on it. Ask your CPA first.
An existing loan. Owner financing works best on land you own free and clear. If there's still a loan on it, talk to your lender and your attorney first.
How we set it up with you
We've sold rural homes and land together for 30 years.
- James looks at the whole property first. James is an Accredited Land Consultant. We drive the property and look at road frontage, access, water, electricity, restrictions and usable acreage.
- If the land sells better in pieces, James draws up the whole project. He lays out the tracts, plans the frontage and access for each one, and takes the plan through the county approval process for you. A property that sat for a year as one piece was divided into five tracts, and all five sold and closed for more together than the original asking price. That's what happened on that property, not a promise about yours.
- We price it with the Whole Property Method, the land, the home and the improvements as one property, and show you what the terms add.
- We put it where land buyers are looking: both our websites, the full MLS, the Land Broker Co-op and RLI land network, social media with drone video, postcards and signs.
- Barbara holds the deal together to closing, working with your attorney or title company.
Is owner financing right for you?
- I own the land free and clear, or I've talked to my lender about it
- I don't need all my money at closing
- A steady monthly payment would help me
- I'm comfortable with the land securing the note if the buyer stops paying
- I'll have an attorney or title company prepare the documents
- I'll ask my CPA about the tax side before I agree to terms
If most of these fit, sit down with us. We'll drive the property with you and show you a regular sale and an owner-financed sale side by side. Call James Peterson ALC at (210) 740-1295 or Barbara Peterson at (210) 540-6487.
This guide is general information, not legal, tax or lending advice. Examples are for illustration only.
Frequently Asked Questions
What is owner financing on land?
The seller acts as the bank. The buyer pays a down payment at closing, then pays the seller monthly with interest, and the land secures the note until it's paid off. An attorney or title company prepares the documents.
What would 10% down and 10% interest pay me?
On a $200,000 sale with payments figured over 30 years, the buyer pays $20,000 down and $1,579.63 a month. If it runs the full 30 years, you collect $588,666 in total. With a 10-year balloon, you collect $373,244, including a final payment of $163,688. These are examples, and many buyers pay off early.
What happens if the buyer stops paying?
You would foreclose and get the land back, which takes time and has costs. A real down payment and checking the buyer before you agree lower that risk. Your attorney sets up the documents so the land secures the note.
Can I owner finance land if the buyer will build a home on it?
Often yes, but federal and Texas lending rules can apply when the buyer will live there, including limits on balloon payments. Your attorney decides which rules apply before anything is signed.
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