Land Note Investing Interview: How to Sell Your Seller-Financed Notes for Cash at Closing

In this podcast interview, Eric Scharaga discusses land note investing, seller financing, and how land investors can offer terms to sell properties faster while still getting cash at closing.

If you've ever wondered how to offer seller financing without holding the note long-term, what makes a land note sellable vs. problematic, why loan servicing matters more than you think, or the difference between land contracts and notes/mortgages — this interview covers all of it.

My Journey from Frustrated Landlord to Note Investor

I spent 23 years as a high school teacher while building a rental property portfolio on the side. Starting in 2001, I purchased and rehabbed single-family homes with dreams of achieving financial freedom through real estate.

After 13 years of dealing with the constant stresses of landlording — interrupted holidays, tenant headaches, maintenance emergencies — I realized I wasn't going to achieve my goals through rental properties.

In 2016, I discovered notes. Notes offered what rentals never could: truly passive real estate income. No 3 AM phone calls about broken water heaters. No evictions. No property management headaches. Since 2016, I've purchased over 500 notes across residential, non-performing, active bankruptcy, and vacant land categories.

But here's what changed everything: I discovered the land space. Land investors are creating some of the best seller-financed notes in the market. The problem? Most land investors don't want to hold notes long-term. They're in the business of flipping land, not collecting monthly payments for 5–10 years. That's where I come in.

The Land Note Opportunity

Properties with seller financing sell 30–50% faster, command 20–40% higher prices, and attract 10X more buyers. But the land business is cash-intensive. Holding a $400/month note for 5–10 years doesn't help you grow today.

The solution: sell your seller-financed note at closing for immediate cash — typically 80% of the purchase price. You get most of your money upfront, the buyer gets favorable financing, and a note investor gets a quality performing asset.

What Makes a Note Sellable vs. Problematic?

Common issues that make notes unsellable:

• Self-serviced loans. No third-party documentation, disputes over payment history. Use a professional loan servicer from day one ($15–30/month).
• Land contracts. Seller retains title (liability exposure), harder to sell, complicated foreclosure. Use promissory note + deed of trust instead.
• Poor documentation. Missing credit reports, no down payment verification, unrecorded liens. Follow proper origination procedures.
• Weak underwriting. No credit check, zero down payment, risky borrowers. Require minimum credit score and down payment.

My Four Pillars of Note Underwriting

Pillar 1: The Property

I look at every deal through the worst-case lens: if the borrower defaults, do I want this property back? Can I resell it easily? Does it have legal access? What's the topography and usability?

Pillar 2: Investment-to-Value (LTV)

My maximum: 70% LTV. What I'm paying for the note divided by property value must be 70% or less. This protects me even if the borrower defaults and property values decline.

Pillar 3: The Borrower

Credit score requirements scale with down payment: 660+ for 20% down, 640–659 for 25% down, 620–639 for 30% down, below 620 requires 50% down. I look beyond the score at what's actually on the report — medical debt is common and doesn't always indicate payment problems.

Pillar 4: Loan Terms and Yield

Target interest rate: 9–12% (sweet spot for land notes). Preferred term: 5–10 years. Must be amortizing monthly payments. My two percent rule: monthly payment should equal about 2% of my purchase price for strong cash flow.

Why Loan Servicing Matters

Using a professional loan servicer is the single best $20/month you'll spend. They collect payments, track history with professional software, send tax statements, interface with borrowers, and maintain legal documentation.

When I buy a professionally serviced note, I know every payment is documented, the balance is accurate, the payment history is clean, and transfer is simple. Self-serviced notes may be discounted 10–20% or declined entirely.

Land Contracts vs. Notes/Mortgages

I strongly prefer notes over land contracts for four reasons: no liability exposure (buyer owns property, not you), easier to sell (land contracts sell for 10–20% less), clear foreclosure process (3–6 months for deed of trust vs. wildly variable for land contracts), and clean title (no memorandums clouding the chain).

My recommendation: use promissory note + deed of trust in non-judicial states, or promissory note + mortgage in judicial states. Avoid land contracts unless you have a specific state-law reason →

My Note Buying Program

I created this program specifically for land investors who want to offer seller financing (sell faster, higher prices), get cash at closing (80% of purchase price), and avoid holding notes long-term.

Key Takeaways

1. Seller financing is powerful: sell 30–50% faster, command 20–40% higher prices, attract 10X more buyers.
2. You don't have to hold the note: sell at closing for 80% cash and keep capital working.
3. Do it right from day one: professional servicer, note + deed of trust (not land contract), credit check and down payment, attorney-prepared documents.
4. What makes notes valuable: good property, strong borrower (660+ credit, 20%+ down), good terms (9–12% interest, 5–10 years), low LTV (70% or less), professional servicing.
5. State matters: non-judicial states are faster and easier for foreclosure.