How does a land contract work in Michigan? Bill Beddoes is an expert on this topic. He has purchased over 60 properties, however, instead of using brokers like most sellers, Bill cuts out the middlemen and saves himself thousands in commissions by selling the properties himself.
How does he do it? By using land contracts, also called a “contract of sale” or “contract of deed,” and he’s going to explain how easy it is. Anyone can do this.
If you’re wondering how does a land contract work in Michigan, Bill’s been using land contracts very successfully for over a decade in the state Michigan and will tell you all about it.
In this interview, How Does a Land Contract Work in Michigan with Bill Beddoes, Bill will explain the process and give you some great money-saving tips.
LAND CONTRACTS – BILL BEDDOES
Narrator:
Welcome to Imagine Wealth Without Risk, the podcast that guides you to fulfilling your dreams through guaranteed secure investing. Today we’ll answer how does a land contract work in Michigan? Now, here’s your host, Ted Thomas.
Ted Thomas:
Hi everyone, this is Ted Thomas and welcome aboard. As you know, this podcast is called Imagine Wealth Without Risk. I’m lucky today because we have one of our coaches on board, and he and I are going to talk a little bit informally about contract for sale or cash for deed and that thing. Fortunately, Bill is an expert.
So let me give you a quick introduction to Bill because some of you don’t know him, but Bill’s kind of a maverick guy… Not kind of, he’s definitely a maverick, a renegade. The rest of the world goes out and borrows money to do this, but not Bill. He knows how to use credit cards. He did 60 deals using credit cards, think about that. So he doesn’t have to go out begging for money, he just uses credit cards and gets the job done.
Then on the other side of it, most people go to the bank and they wait months and months to get financing and all that. Bill doesn’t do that, he just creates a contract. I call it a contract for deed or a contract for sale. You were going to talk about those two things today.
So here’s a guy that he doesn’t need the rest of the market, he doesn’t need brokers, he doesn’t need repair men, he doesn’t need… He can do the tax lien and deed business like no one else. So I wanted to bring him on board and clear up some of this stuff. Because a guy that’s done 40, 50 deals, and done them all the same way can give us some real good insights. So Bill you’re there, can you hear me okay?
Bill Beddoes:
I can Ted.
WHAT IS A LAND CONTRACT IN MICHIGAN?
Ted Thomas:
Bill, I gave a little brief introduction, but you can always add stuff as you go along if you want to. My clients and your clients as you know, they’re used to this traditional real estate stuff, and that’s all fine for people that are traditional real estate people. They’re the ones that don’t make any money, You’re a guy out making money and really doing deals, and I know you use this contract for sale to get things done. So first of all, tell us what a contract for sale is.
Bill Beddoes:
Okay. Basically, it’s a contract between the buyer and seller, and it’s just a piece of paper.
Ted Thomas:
I see. Well, do I have to have an attorney to do that? What do I do?
Bill Beddoes:
Well, there are a couple ways to get a land contract or a contract for sale. What I do mostly is I go to a title company who has one on staff. If they have one on staff, they don’t charge you anything extra to draw up the land contract.
Ted Thomas:
Oh, so the title company has an attorney. Okay, I got it.
Bill Beddoes:
A lot of them do, there are some that don’t. If they don’t, they’re going to charge you a whole bunch of money, so find a title company who has one on staff.
Ted Thomas:
Okay. Attorney on staff, and you want him because.. Why do you want-
Bill Beddoes:
Well, because it’s always best to have an attorney draw up any legal paperwork. You can Google it, and you can also find them. When you do that, you have to include the state that you own the property in, so that it’s legal in that state because each state has its own separate rules.
Ted Thomas:
Well, we understand that because that’s the way the counties are; they’re all different in different states. I got that. So you’d go to a title company and get this contract. But you’re getting it from them not because you’re asking them for legal advice, you just want a legal contract?
Bill Beddoes:
Correct.
Ted Thomas:
Okay. So now I don’t have to pay 500 bucks an hour for that, do I?
Bill Beddoes:
No. If they’re on staff, they’ll include that at no extra charge. It’s what I have found.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? TERMS
Ted Thomas:
Okay. Good. So it’s just a contract between two people, and we can get one at a title company. What has to be in the contract?
Bill Beddoes:
Well, first of all, you need to negotiate out the contract, and the terms that you need to be concerned about is number one, the down payment, how much are they willing to give you up front. Second of all, what can they afford on a monthly payment?
Ted Thomas:
All right.
Bill Beddoes:
Then the interest rate comes in third.
Ted Thomas:
I see.
Bill Beddoes:
Then number of years that the contract will last, and last of all is actually the price. Once you get four of those numbers agreed upon, the fifth one works itself out automatically because of the math.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN AND WHY USE IT?
Ted Thomas:
Let me ask you a question that I should have asked first, and that would be, “Why on earth are you even using a contract for sale? Why don’t you just get a broker and do it that way?”
Bill Beddoes:
Well, the big thing is you can make more money by taking and using a land contract or a contract for sale, so-
Ted Thomas:
How do you make more money?
Bill Beddoes:
Well, because they don’t care about the price, they just want a house. A lot of times, you can get $5,000 to $10,000 more by using this method.
Ted Thomas:
Oh, wait a minute. You mean to tell me you can get more money for a property if a person makes payments than if you’d have a realtor sell it?
Bill Beddoes:
Correct. Or if you have a cash buyer, yeah. Because remember that if you have a loan, the loan company wants to appraise the property. They don’t want to give you anything over and above what they think it’s worth. Here, they just want the house, and they want an affordable payment. That’s the most important thing on a land contract or a contract for sale.
Ted Thomas:
You know, when I teach my classes, I’m always saying to people, I say, “Let’s think about this a little bit. If you get the Sunday paper, and you try to figure out the price of a new Buick or a used car, and in there, you can’t find the price of the darn thing, they just tell you the payments.” So it’s the same with houses then, people just worry about the payment. Is that it?
Bill Beddoes:
Absolutely. They want to make sure that they can make the payment so that they can end up with the property in the long run, and they don’t necessarily care how long it’s going to take.
Ted Thomas:
So what were those four things once again? I didn’t write them down, but I will now.
5 ITEMS TO INCLUDE IN A LAND CONTRACT
Bill Beddoes:
- Number one is the down payment.
- Number two is how much their monthly payment needs to be.
- Three is the interest rate.
- Four is the number of years that the contract will run,
- and then five is the price.
So there are actually five different items.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? THE AGREEMENT
Ted Thomas:
So how do you know the payment and stuff? Do you have an amortization scale you use in a little booklet or you go online? How do you know what the payment is going to be?
Bill Beddoes:
Well, whatever they can afford. So if they can afford $500 a month, we make the payment $500 a month. If they can afford $300 a month, we make it that. Remember that when this contract goes into effect, they still have to pay the insurance. They have to pay any repairs, and they have to take-
Ted Thomas:
Pay taxes.
Bill Beddoes:
… and pay taxes. Yes, the three things that a renter would not pay.
Ted Thomas:
So they’re paying the taxes. They take care of their own maintenance, and they have to have insurance.
Bill Beddoes:
Correct.
Ted Thomas:
That’s just like having a mortgage, except you tailor it to the client, so you can get the thing sold.
Bill Beddoes:
Right.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? THE SALES PROCESS
Ted Thomas:
So does that speed up the sales process?
Bill Beddoes:
From the time we start negotiating on this until we close, a couple of days, a week tops.
Ted Thomas:
Oh, it takes two weeks to get an appraisal for God’s sake or more.
Bill Beddoes:
Exactly, and we don’t have to do that.
Ted Thomas:
So you just skipped right by all that stuff.
Bill Beddoes:
Yup.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? YOU’RE THE BANKER
Ted Thomas:
So you’re the banker. You’re doing the approval?
Bill Beddoes:
Exactly.
Ted Thomas:
And they don’t have to wait umpteen weeks to say, “Oh, your credit need to be repaired,” and all that stuff. You don’t give a damn about the credit. You just want to get a payment.
Bill Beddoes:
Right. So it’s not like going to Bank of America or Wells Fargo. They’re dealing with the “Bank of Bill”.
Ted Thomas:
The Bank of Bill. Okay. Well, I like that. That’s good. So the advantages to the customer are, “You get it done quickly, you make the payment the way they want it.” Anything else?
Bill Beddoes:
As long as they’re happy with the house, it’s just about them being able to move in quicker.
A ‘CONTRACT FOR SALE’ IS A ‘LAND CONTRACT’ IN MICHIGAN
Ted Thomas:
Wow, that’s a great deal! Do you call it a contract for sale? What do you call that?
Bill Beddoes:
In Michigan, it’s referred to as a land contract.
Ted Thomas:
Isn’t that the same thing?
Bill Beddoes:
In other states, it’ll have other names, but almost all of the Midwest calls it a land contract.
Ted Thomas:
So if I had a $50,000 house, and I want to sell it, and the guy’s got a couple of grand. If I’m willing to take a couple of grand, and he’d pay me $500 a month, I’ve got it sold?
Bill Beddoes:
Exactly.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN TO GET PAID?
Ted Thomas:
Well, that sure makes life a lot easier. So you’ve done a lot of these deals. It sounds too good to be true. So tell me this. Do these people keep paying or did they bail out?
Bill Beddoes:
Some of both, but I would say that about 90% of the people will continue to pay because they don’t really have a lot of other options elsewhere, especially if their credit isn’t good.
Ted Thomas:
Oh. And so you don’t give a damn about their credit.
Bill Beddoes:
I really don’t care. As long as they can continue to make payments, we’re good.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? CONTRACT LENGTH
Ted Thomas:
How long a contract will it be?
Bill Beddoes:
Because of my age, I like to do 10 years or less. Okay?
Ted Thomas:
All right.
Bill Beddoes:
Now, if it’s a younger person, it could be 15. It could be 20, 30 years, whatever.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN LEGALLY?
Ted Thomas:
So there’s no law against this, is there?
Bill Beddoes:
No, it’s perfectly legal.
Ted Thomas:
It happens all the time, right?
Bill Beddoes:
Well, especially in commercial deals. More commercial deals are sold this way than houses and land are.
Ted Thomas:
Why do you suppose people don’t use it? They just don’t know or what?
Bill Beddoes:
A lot of people don’t know a lot about it. Years ago, maybe 20, 30 years ago, it was a lot more popular than it is today. You just have to take in and educate people. Most people have heard that it exists, but it’s just a matter of taking and educating them as to how it works. Once they find out that they’re going to qualify for it, they’re usually all over the deal.
Ted Thomas:
So when you say they, you mean the buyers.
Bill Beddoes:
Yes, that’s what I’m referring to. It’s the buyers, yes.
Ted Thomas:
So when you have someone inquire to you, you just ask them what they can afford?
Bill Beddoes:
Right. The two key questions are, “How much can you come up with for a down payment, and what can you afford monthly?”
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? EXAMPLE 1
Ted Thomas:
I got it. Okay. Do you have any examples of these things?
Bill Beddoes:
Sure. I have actually three. 301 Cass Avenue. I bought it at the tax sale for $10,000, and I resold it for $30,000.
Ted Thomas:
Wow! $20,000 bucks.
Bill Beddoes:
Right. It’s a $20,000 profit, correct.
Ted Thomas:
Whom did you sell it to?
Bill Beddoes:
I actually sold it to a realtor who was going to rent it out.
Ted Thomas:
You’re kidding?
Bill Beddoes:
No.
Ted Thomas:
So you sold it to a realtor, and the realtor signed the contract. Is that right?
Bill Beddoes:
Absolutely.
Ted Thomas:
And you didn’t go through all that hoopla of going to a bank, and you didn’t go to a big closing and all that business?
Bill Beddoes:
We actually closed at a title company because I think that the fairest way to do a closing is to do it that way. That way, the buyer and the seller are both satisfied that it’s actually an effective way to do business.
Ted Thomas:
So you like to use other people that are professionals. That’s good. So does that realtor pay you on time?
Bill Beddoes:
Yes.
Ted Thomas:
How much money would you get monthly on that?
Bill Beddoes:
I don’t have the contract right in front of me, but I think it was around $300 a month.
Ted Thomas:
Yeah. And did you get a nice down payment or something?
Bill Beddoes:
Yeah, I think I got $5,000 on that one.
Ted Thomas:
Wow! So you got half of your money back?
Bill Beddoes:
Yes.
Ted Thomas:
So in two years, you got all your money back?
Bill Beddoes:
Pretty much, yes.
Ted Thomas:
And how long was the contract?
Bill Beddoes:
Again, I don’t have it right in front of me, but it was probably 10 years.
Ted Thomas:
So you get eight years-
Bill Beddoes:
-more 10 year contracts than any other number.
Ted Thomas:
So that means you get eight years at $300 bucks a month.
Bill Beddoes:
Right.
Ted Thomas:
Wow, in one deal, and you already got half your money back? That’s really good.
Bill Beddoes:
Right.
Ted Thomas:
So what’d you call that one?
Bill Beddoes:
That is 301 Cass Avenue.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? EXAMPLE 2
Ted Thomas:
All right, that’s good. You got another one?
Bill Beddoes:
Yep. The second deal was 128 West Clark, and I bought it at the tax sale for $6,200, which was opening bid, and I was able to resell that for $30,000. So I made $23,800 on that one.
Ted Thomas:
Did you do a contract for sale, or you just sold it?
Bill Beddoes:
No, I did a contract for sale.
Ted Thomas:
So you sold it for 30,000?
Bill Beddoes:
Right. I think I also got $5,000 down on that one. It’s nice if you can get your winning bid back.
Ted Thomas:
Oh yeah, get all your money back.
Bill Beddoes:
Get all your money back, and then it’s just payments for the difference. Yes.
Ted Thomas:
But you got pretty close?
Bill Beddoes:
Yes. Very close on that one, yes.
Ted Thomas:
Do you remember what the payment was?
Bill Beddoes:
That was very similar also. I think it was either $300 or $400, so…
Ted Thomas:
Wow. That’s great. So now just between two of them, you got 600 or 650 bucks a month. It’s terrific. That’s great. Okay, good, a very small investment.
Bill Beddoes:
Yes.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? EXAMPLE 3
Ted Thomas:
Any more?
Bill Beddoes:
Yeah. There was a commercial building I bought it 217 5th St., and I bought it at the auction for $14,000. I didn’t do quite as well with this one, but I did sell it for $28,000.
Ted Thomas:
You doubled your money.
Bill Beddoes:
Doubled my money, but what was interesting on this is we only did a two-year land contract.
Ted Thomas:
Wow.
Bill Beddoes:
He was paying me more than $1,000 a month.
Ted Thomas:
No way.
Bill Beddoes:
Yep. So it was to a local car dealer who attends the auctions like I do. He’d seen me buy it, and he’d seen that I was going to bid it up if I needed to. And that was also the opening bid, $14,000.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? BUYING
Ted Thomas:
Wow, that’s terrific! Good for you. Well, let’s summarize here a little bit. You’re saying to me that first of all, you’re a guy that’s a… let’s call you a maverick because you don’t even care about borrowing money. But you could borrow money if you wanted to. You just use your credit cards because Michigan will let you buy properties with a credit card, right?
Bill Beddoes:
Correct. Yes.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? SELLING
Ted Thomas:
So you use your credit card. Now when you want to sell, how do you sell it? I mean, do you put it on Craigslist, do you do Facebook ads, or what do you do? How do you sell them?
Bill Beddoes:
I like to put a sign on the property. So I usually describe what it is, whether it’s a house or a duplex, and then the important words on there are, “Land contract available.” Some places in America could call it owner financing. Whatever your local terminology is, is the terminology you want to use.
Ted Thomas:
So does the average guy understand what that means?
Bill Beddoes:
Well, if they don’t fully understand it, they’ll call and ask you some questions. That’s what you want. You want to start a conversation with somebody and tell him your set of rules which is, “I don’t do more than 10 years anymore,” and, “I like X amount of dollars down.” If they come close to that, we probably have a deal. Then we’d just figure out what the monthly payment is, and if they can afford it, we’re good to go.
Ted Thomas:
Can you get enough people to respond on a sign?
Bill Beddoes:
I found that in the past, most of the time I’ll get two or three phone calls a week.
Ted Thomas:
Two or three a week?
Bill Beddoes:
Two or three a week. But one of my students who just did a deal that way, they even got more phone calls. As the market tightens and prices rise, more people are going to be looking for alternatives.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? THE ESTIMATE
Ted Thomas:
So you’re looking for this bread and butter market. When you buy a property, you’ll probably look at the property and say, “I could sell that for X.” But you actually don’t do that. You actually take a broker ,and he tells you. Isn’t that right? Can you tell me that?
Bill Beddoes:
Well, sometimes I go to a broker, and I try to get a fair estimate of what the property is worth. And sometimes, I need to cut the price down a little bit so that we can move the property quicker because I don’t want to be taking phone calls for two or three months.
Ted Thomas:
You don’t even want to do phone calls to make your 20 grand?
Bill Beddoes:
Well, I don’t mind doing phone calls, but I just don’t want to drag out the process too long. I’d rather take a little less profit and sell the deal quicker, so…
Ted Thomas:
I got it. And how many people do you think have to call you before you make a deal?
Bill Beddoes:
I think the most I’ve talked to is about 20, and then we usually have a deal.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN PER COUNTY?
Ted Thomas:
Yeah. Now you don’t always do business in the exact same town. You’re in different towns, right?
Bill Beddoes:
Right, and a lot of the properties that I own are two counties over from where I live.
Ted Thomas:
So you’re saying this will work in any county, at least at Michigan. It will work in any county. Is that what you’re saying?
Bill Beddoes:
Right. I think it’ll work in any county in America, to be honest with you.
Ted Thomas:
Oh, I’ll be darned. So this isn’t some unique thing that only Bill can do. Anybody could do this.
Bill Beddoes:
Anybody can do it. All they have to do is get a plain sign and a magic marker and a stake, and put it in the ground. The bigger you can put in the ground, the more that people will see it . But some local cities have ordinances about how big those signs can be. So if you’d get a standard 24″ x 30″ sign that you can get in any hardware store, that’s always acceptable, I found.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? WHERE TO GET ONE
Ted Thomas:
We’ve got another couple of minutes, so I’m wondering if we could go back to this contract or land contract or contract for deed. I think some people call it cash for deed, they’ve got all kinds of names for these thing. So I can get one of those where?
Bill Beddoes:
Well, you’re going to get it from an attorney, or you can get it from a title company who has an attorney on staff for free.
Ted Thomas:
Well, I like the “for free” part, that sounds pretty good.
Bill Beddoes:
I do, too.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? TITLE COMPANIES
Ted Thomas:
Okay. Now the title companies, are they going to give me a bad time if I go in there, or do they like me?
Bill Beddoes:
Well, no, they’ll like you because they want to do business with you, and they’re going to make some money off of you.
Ted Thomas:
How do they make money?
Bill Beddoes:
Well, they make money, first of all, by preparing the paperwork and closing the deal. There are four or five different fees that they charge. If they can do title insurance, they like that because that brings them a fair amount of money.
Ted Thomas:
So they like you when you come there. It’s not like you’re an oddball. I mean, this is okay for them.
Bill Beddoes:
Right. And another thing you can do is if you’re not using a realtor, you could stop at any title company and say, “I’m going to sell this property on my own,” and they will give you a packet of forms so that you can draw up the contracts.
Ted Thomas:
Wow. So they’ll actually give you a contract you can use?
Bill Beddoes:
Yes, and it’s free until you close the deal, and then you’re going to pay your fees.
Ted Thomas:
And then will the pay be $500 bucks or 2,000? What would it be?
Bill Beddoes:
It’s going to vary, but I think an average might be around $1,200 to $1,500.
Ted Thomas:
Oh, okay. So that’s a good few hours work for them, but they’d get a pretty profitable work, right?
Bill Beddoes:
Right.
Ted Thomas:
So everybody is incentivized. The client likes it because they get the payment they want, right?
Bill Beddoes:
Correct.
Ted Thomas:
And you like it because you can sell it fast?
Bill Beddoes:
Correct.
Ted Thomas:
And the title company likes it because they get to do a certain amount of work. So this is a win-win for everybody, right?
Bill Beddoes:
Correct.
WHY AREN’T LAND CONTRACTS MORE COMMONPLACE?
Ted Thomas:
So why isn’t it commonplace all over the USA?
Bill Beddoes:
Right now, realtors are pushing their buyers into getting a mortgage. Or if you’re a landlord, some of them are paying cash, and so more transactions happen. Those two ways by far, then people doing owner financing or land contracts.
HOW DOES A LAND CONTRACT WORK IN MICHIGAN? A SUCCESS STORY
Ted Thomas:
I think you did a tremendous job here, and for everybody who’s listening, Bill’s a coach. If you want to know about land contracts, this is a guy that’s doing it.
On my mastermind, I have a young woman from Wisconsin. We don’t do much business in Wisconsin because the rules there are such that tax lien and deed buyers can’t make a lot of money. But she came to class and learned how to do it and said, “I’m going to do it in Michigan.”
I said, “Well, then you better get Bill as a coach.” Then she sure chose Bill and on her first deal which… By the way, she only was in that deal a couple of weeks and getting started. She thought she was going to sell it at one price, then the realtor told her, “Drop the price by 10,000.” I told her to add $10,000, and believe it or not, she added the $10,000 and guess what? She’s now on a contract for sale.
I don’t know if she’ll get it done, today is Friday, but she said, “I think by Monday, I’ll have all the paperwork all done.” She had to go find an attorney to do it, but it would have been better to go to the title company, right?
Bill Beddoes:
Right.
Ted Thomas:
She’s going to double her money on that property in 30 days. I don’t know anybody who wouldn’t want to do that. So thanks to you. None of that would’ve happened unless you had been her coach, so that’s really good.
Bill Beddoes:
Well, she was a great student, Ted. They worked really hard to make this all come together, and they added a great price at the secondary auction, and-
Ted Thomas:
Didn’t they have to drive hundreds of miles to come to Michigan to do it? Is that what they did?
Bill Beddoes:
They did, so they probably had to drive 500 or 600 miles or more.
Ted Thomas:
Well, when people want to make a deal, they want to make a deal, don’t they, huh?
Bill Beddoes:
Exactly.
Ted Thomas:
So this has been Bill Beddoes, and he’s our expert for contract for sale, answering how does a land contract work in Michigan? I hope you guys learned a lot.
SUMMARY
How does a land contract work in Michigan? It’s easy and a much more cost effective way to sell properties. Bill Beddoes has been using land contracts successfully in Michigan for over a decade and speaks from a wealth of experience.
In this interview, How Does a Land Contract Work in Michigan with Bill Beddoes, Bill explains how he gets the contracts for free, what items need to be in the contract, and how he uses them to sell properties.
Bill gives several examples of successful land contract deals he’s done and provides a lot of excellent tips.
Bill’s an outside the box thinker who’s found a way to make high profits by cutting out the middlemen and without having to do a lot of work. He even purchases the properties in an unusual way, using credit cards.
In this interview he shares his knowledge, which he has taught to many others, because this is something that anyone can do.
If you liked How Does a Land Contract Work in Michigan with Bill Beddoes, and you’d like to learn more, Ted has a gift for you called Safe Haven. It’s a fast track course, valued at $197, but for you it’s FREE.
The course is 2 streaming videos and a PDF, and it will teach you about tax lien certificates and tax deeds. So if you’d like to learn how to buy good properties in nice neighborhoods for pennies on the dollar, act now and get your FREE Safe Haven course today.
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