Whether to take $2,000 or $6,000 down on a $22,000 rural parcel sold on terms

I only know screening from the rental side, but the pattern there is that the size of the move-in money predicts almost nothing on its own and the source of it predicts a lot. Somebody who saved $2,000 over eight months is a different animal from somebody whose cousin handed them $6,000 last Tuesday. Do you ever ask where the down payment came from, @hannah_west29?

Middle numbers are usually fine, and $3,500 shouldn't be treated as a compromise nobody wants. On small buildings generally, mid-tier deposit tenants tend to be the steadiest. What actually breaks at scale usually isn't the deposit amount, it's having no process for month two when the payment doesn't show up.

$230 a month on a $22,000 parcel over 9 years runs to a rate in the low double digits in a standard amortization calculator. That's within the normal range for land paper, not a misread of the terms.

In cheap land at low price points generally, $2,000 down is basically the price of entry. At $6,000 the competition shifts toward buyers who would rather just buy something outright for that money. The right choice is not independent of the price band, @hannah_west29. On a $22,000 asking price there is room to work with. Under $12,000 there usually is not.

Every unit teaches something, and the recurring lesson is that recovery cost after a failure dominates the math. If re-marketing a parcel costs $700 in photos, listings and time, and low down doubles the default rate, that expense shows up across every parcel in the portfolio. Worth knowing the re-marketing cost before picking a column.

The version that doesn't cause sleepless nights is usually the higher down payment. Worth noticing, though, when the question being answered is a temperament question dressed up as a math question.

Before choosing either option, it is worth knowing how the forfeiture or foreclosure path works in the state where the parcel sits, because whether a defaulted contract takes 30 days or a full court process changes the cost of a low down payment enormously, and that varies state by state. A local attorney can say which path applies to the specific paperwork. @hannah_west29, do you know which one applies here?

@ehernandez74 that's the piece I'd been missing in my own reading. I'd been comparing down payments as if the recovery was the same everywhere.

I've sold nine parcels on terms over about six years. Small sample, take it as such. My three defaults were all in the lowest down payment group, and two of them came in the first five months. What surprised me is that the ones who put down more also paid off early more often, which cost me the interest I was counting on. So high down bought me reliability and took away my back end. There isn't a free column here.

@karen_whitfield's payoff point is the one worth chasing. Read the note language on early payoff and check whether there is any prepayment provision at all, and whether it is enforceable where the parcel sits, since that is a state law question for a lawyer. A high down buyer who pays off in month 14 turns a 9 year interest projection into a rounding error. @hannah_west29, a spreadsheet built on the full 108 payments in both columns is carrying an assumption that is doing all the work.

Reading this as someone who wants income without a second job, the low down option sounds like it comes with a job.

Reading twice and still stuck on one thing. If the buyer defaults in month 8, does @hannah_west29 keep the $2,000 down and the eight payments, or does some of that go back? I assumed keep, then I read that some states treat it as more like a mortgage and you can't just keep everything.

@kevin_lombard you assumed the risky thing. Whether a defaulted installment land contract gets unwound as a forfeiture or has to go through a foreclosure style process, and what the seller keeps, differs by state and sometimes by how much equity the buyer built. That's a licensed attorney question in the specific state, not a forum one. @hannah_west29, I'd vote high down for the diligence reason: it shortens the window where I'm exposed to a process I don't control.