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Several years ago I purchased four single family houses on an installment contract from an elderly gentleman and his wife. The couple had lived in my town all their life and had decided to retire to Florida. Not wanting to be burdened with continuing to manage their rental properties, they decided to sell. However, selling for all cash would have generated a huge capital gains burden( their houses were fully depreciated). The solution was to sell on an installment basis whereby only the principal payments would be reported as gain.
I suggested to the retiring couple that they put their properties into separate Land Trusts and sell me the beneficial interest on a contract. This method of selling would allow the title to the property to stay in their trust’ s name( with them controlling the Beneficial Interest) until I paid them in full. If I defaulted, they would be able to repossess the Assignment of Beneficial Interest... and not have to foreclose.
Being stuck in their ways of doing things, the old couple said they did not want to sell using a Land Trust but wanted to record a deed in my name( actually I had them record the deed in the name of my Land Trust Trustee) and record a mortgage on each property for the amount of debt I would owe
The Old Man and His House them. Not wanting to kill the deal, I agreed to do it their way.
Buying on an installment contract has its advantages. I paid the couple a small down payment and made them monthly payments amortized over a 25year period. The interest rate they charged me was less than what the banks would have charged and more than they could receive in a certificate of deposit. Everybody wins when you cut the banker out of the transaction.
I rented the houses out to families and made my payments to the elderly couple for several years. The favorable terms I received on the contract allowed me to have a monthly positive cash flow on all four properties. Life was great!